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Brees Inc., a company that produces and sells a single product, has provided its contribution format income statement for April.
Sales (6,200 units) $136,400
Variable expenses 80,600
Contribution margin 55,800
Fixed expenses 48,700
Net operating income $7,100
Required:
1. If the company sells 5,800 units, its total contribution margin should be closest to ________.
O $55,800
O $52,200
O $6,642
O $47,000

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Answer:

The correct answer is B.

Explanation:

Giving the following information:

Sales (6,200 units) $136,400

Variable expenses 80,600

The total contribution margin is the difference between the sales revenue and the total variable costs. First, we need to determine the unitary selling price and unitary variable costs:

Selling price= 136,400/6,200= $22

Unitary variable cost= 80,600/6,200= $13

Now, we can calculate the total contribution margin at 5,800 units:

Total contribution margin= 5,800*22 - 5,800*13= $52,200

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