Iaci Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $133.60 per unit. $$\begin{array} { | l | r | r | }
\hline \text { Sales volume (units) } & 4,000 & 5,000 \
\hline \text { Cost of sales } & \$ 383,600 & \$ 479,500 \
\hline \text { Selling and administrative costs } & \$ 124,400 & \$ 136,000 \
\hline
\end{array}$$ The best estimate of the total contribution margin when 4,300 units are sold is:
A)$112,230
B)$162,110
C)$28,380
D)$45,150

Question

Iaci Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $133.60 per unit. $$\begin{array} { | l | r | r | } 
\hline \text { Sales volume (units) } & 4,000 & 5,000 \
\hline \text { Cost of sales } & \$ 383,600 & \$ 479,500 \
\hline \text { Selling and administrative costs } & \$ 124,400 & \$ 136,000 \
\hline
\end{array}$$ The best estimate of the total contribution margin when 4,300 units are sold is:
A)$112,230
B)$162,110
C)$28,380
D)$45,150

Quizplus · Accepted Answer

The contribution margin is the difference between the selling price per unit and the variable cost per unit. The variable cost per unit is the cost of sales divided by the number of units sold. The contribution margin per unit is $133.60 - ($383,600 / 4,000) = $89.60. The total contribution margin for 4,300 units is $89.60 * 4,300 = $384,880.

Iaci Corporation Is a Wholesaler That Sells a Single Product