Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:

A) $27,000
B) $63,000
C) $8,600
D) $75,000

Question

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

The total contribution margin for the month under variable costing is:

A) $27,000
B) $63,000
C) $8,600
D) $75,000

Joseph Cioffi · Accepted Answer

Final Answer : B, Explanation :  We can calculate the total contribution margin under variable costing by subtracting the variable expenses from the total sales revenue.Total sales revenue = 95,000Variable expenses:- Cost of goods sold = 42,000- Variable selling expenses = 10,000- Variable administrative expenses = 20,000Total variable expenses = 42,000 + 10,000 + 20,000 = 72,000Contribution margin = Total sales revenue - Total variable expenses= 95,000 - 72,000= 23,000However, this is not the total contribution margin, as some fixed manufacturing overhead costs have been incurred. To account for these costs, we need to add back the fixed overhead cost that was expensed under variable costing:Fixed manufacturing overhead cost = 40,000Total contribution margin under variable costing = Contribution margin + Fixed manufacturing overhead cost= 23,000 + 40,000= $63,000Therefore, the correct choice is B, with a total contribution margin of $63,000.

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:

A) $27,000
B) $63,000
C) $8,600
D) $75,000

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Learning Objectives

Related questions

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:A) $27,000B) $63,000C) $8,600D) $75,000

Definitions

Learning Objectives

Learning Objectives

Related questions

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:

A) $27,000
B) $63,000
C) $8,600
D) $75,000