Bernard Corporation gathered the following information for the year just ended: During the year, Bernard produced and sold 50,000 units of product at a selling price of $9.00 per unit. There was no beginning inventory of product at the start of the year.
What is the contribution margin for the year?

Question

Bernard Corporation gathered the following information for the year just ended:  During the year, Bernard produced and sold 50,000 units of product at a selling price of $9.00 per unit. There was no beginning inventory of product at the start of the year.
What is the contribution margin for the year?

Quizplus · Accepted Answer

Contribution margin is the difference between total sales revenue and total variable expenses. In this case, the selling price per unit is $9.00, so the total sales revenue is 50,000 units x $9.00 per unit = $450,000. Since there was no beginning inventory, we can assume that all costs are variable. So, the total variable expenses for producing and selling 50,000 units are:
Direct material cost per unit = $1.00
Direct labor cost per unit = $1.50
Variable overhead cost per unit = $0.50
Total variable cost per unit = $1.00 + $1.50 + $0.50 = $3.00
Total variable expenses = 50,000 units x $3.00 per unit = $150,000
Contribution margin = Total sales revenue - Total variable expenses
Contribution margin = $450,000 - $150,000 = $300,000
Therefore, the correct answer is B.

Bernard Corporation Gathered the Following Information for the Year Just