Aaker 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)$72, 000
B)$27, 900
C)$234, 000
D)$198, 000

Question

Aaker 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)$72, 000 
B)$27, 900 
C)$234, 000 
D)$198, 000

Quizplus · Accepted Answer

Based on the given data, the total contribution margin can be calculated using the formula:
Total contribution margin = Sales - Variable expenses
Total sales = 45000 units x $12 per unit = $540,000
Total variable expenses = 45000 units x $4 per unit + $90,000 = $270,000
Therefore, total contribution margin = $540,000 - $270,000 = $270,000
Since Aaker Corporation uses variable costing, the fixed costs are not included in the product costs and are treated as period expenses. Therefore, they are not considered in calculating the contribution margin. Thus, the total contribution margin for the month under variable costing is $198,000 (which is the same as the total contribution margin under absorption costing). Therefore, the correct answer is D.

Aaker Corporation, Which Has Only One Product, Has Provided the Following