The Heartlake Corporation manufactures and sells toy gyroscopes. The following data is related to sales and production of the toy gyroscopes for last year. Using variable costing, what is the contribution margin for last year?

Question

The Heartlake Corporation manufactures and sells toy gyroscopes. The following data is related to sales and production of the toy gyroscopes for last year.  Using variable costing, what is the contribution margin for last year?

Quizplus · Accepted Answer

Variable costing considers only variable costs (such as direct materials, direct labor, and variable overhead) as product costs, while fixed costs (such as rent, insurance, and salaries) are treated as period costs. To compute the contribution margin, we need to subtract variable costs from sales revenue.

Contribution margin = Sales revenue - Variable costs
= $3,460,000 - $1,097,100
= $2,362,900

Therefore, the correct answer is C) $362,900.

The Heartlake Corporation Manufactures and Sells Toy Gyroscopes