Bolka Corporation, a merchandising company, reported the following results for October: Sales $ 433,000 Cost of goods sold (all variable) $ 175,900 Total variable selling expense $ 22,300 Total fixed selling expense $ 22,500 Total variable administrative expense $ 10,500 Total fixed administrative expense $ 39,300 The contribution margin for October is<\/p>\n\n\n\n
The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n To calculate the contribution margin<\/strong>, we need to subtract the variable costs<\/strong> from the sales revenue<\/strong>. The formula for the contribution margin is:<\/p>\n\n\n\n [ The total variable costs consist of the cost of goods sold<\/strong> and the variable selling and administrative expenses<\/strong>.<\/p>\n\n\n\n So, the total variable costs<\/strong> are:<\/p>\n\n\n\n [ Now, we can calculate the contribution margin<\/strong> by subtracting the total variable costs from the sales:<\/p>\n\n\n\n [ The contribution margin<\/strong> is a key figure that helps assess the profitability of a company before fixed expenses (like fixed selling and administrative expenses) are deducted. It represents the amount of revenue from sales that is available to cover fixed costs and generate profits.<\/p>\n\n\n\n In this case, Bolka Corporation<\/strong> achieved a contribution margin of $224,300<\/strong> in October. This means that after covering the variable costs of producing goods and selling them (which include both the cost of goods sold and the variable selling and administrative expenses), the company has $224,300 to cover its fixed expenses and contribute to its net profit.<\/p>\n\n\n\n The fixed expenses, which are not affected by sales volume, will come out of this contribution margin. The fixed selling expenses<\/strong> and fixed administrative expenses<\/strong> combined total:<\/p>\n\n\n\n [ After covering fixed costs, any remaining amount will contribute to the company’s profit. The contribution margin is crucial for management to understand the company’s ability to cover fixed costs and generate profit.<\/p>\n","protected":false},"excerpt":{"rendered":" Bolka Corporation, a merchandising company, reported the following results for October: Sales $ 433,000 Cost of goods sold (all variable) $ 175,900 Total variable selling expense $ 22,300 Total fixed selling expense $ 22,500 Total variable administrative expense $ 10,500 Total fixed administrative expense $ 39,300 The contribution margin for October is The Correct Answer […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-182196","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/182196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=182196"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/182196\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=182196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=182196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=182196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\\text{Contribution Margin} = \\text{Sales} – \\text{Total Variable Costs}
]<\/p>\n\n\n\nStep 1: Calculate the Total Variable Costs<\/h3>\n\n\n\n
\n
\\text{Total Variable Costs} = 175,900 + 22,300 + 10,500 = 208,700
]<\/p>\n\n\n\nStep 2: Calculate the Contribution Margin<\/h3>\n\n\n\n
\\text{Contribution Margin} = 433,000 – 208,700 = 224,300
]<\/p>\n\n\n\nExplanation<\/h3>\n\n\n\n
\\text{Total Fixed Costs} = 22,500 + 39,300 = 61,800
]<\/p>\n\n\n\n