Department X began the current year with $26,000 in inventory. During the year, Department X net purchases amounted to $72,000 and its ending inventory was $13,600. Sales during the year totaled $162,000, other direct expenses were $33,800, and total indirect expenses of $24,200. Department X's contribution margin is

Question

Quizplus · Accepted Answer

To find the contribution margin, we must first calculate the cost of goods sold (COGS):
COGS = Beginning inventory + Net purchases - Ending inventory
COGS = $26,000 + $72,000 - $13,600
COGS = $84,400

Contribution margin = Total sales - COGS - Other direct expenses
Contribution margin = $162,000 - $84,400 - $33,800
Contribution margin = $43,800

Department X Began the Current Year with $26,000 in Inventory