Iaci Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $133.60 per unit. Sales volume (units) 4,000 5,000 Cost of sales $ 383,600 $ 479,500 Selling and administrative costs $ 124,400 $ 136,000 The best estimate of the total contribution margin when 4,300 units are sold is:

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Deangelo

Business

4 August, 13:39

Iaci Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $133.60 per unit. Sales volume (units) 4,000 5,000 Cost of sales $ 383,600 $ 479,500 Selling and administrative costs $ 124,400 $ 136,000 The best estimate of the total contribution margin when 4,300 units are sold is:

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Urijah Johnson · Answer 1

Contribution margin = $162,110

Explanation:

Giving the following information:

Selling price = $133.6

Total variable cost (4,000 units) = $383,600

Unitary variable cost = 383,600/4,000 = $95.9

Total variable cost (5,000 units) = 479,500

Unitary variable cost = 479,500/5,000 = $95.9

The contribution margin is calculated using the following formula:

Contribution margin = sales - total variable cost

Contribution margin = 4,300*133.6 - 4,300*95.9

Contribution margin = $162,110