Department X began the current year with $20,000 in inventory.During the year,Department X net purchases amounted to $65,000 and its ending inventory was $12,000.Sales during the year totaled $170,000,other direct expenses were $37,000,and total indirect expenses of $25,000.Department B's contribution margin is

Question

Quizplus · Accepted Answer

Contribution margin is calculated as Sales minus Variable Costs (Cost of Goods Sold and other direct expenses). Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory = $20,000 + $65,000 - $12,000 = $73,000. Contribution Margin = Sales - (Cost of Goods Sold + Other Direct Expenses) = $170,000 - ($73,000 + $37,000) = $60,000.

Department X Began the Current Year with $20,000 in Inventory