Compton Company is a wholesale distributor of educational CD-ROMs. The company's records indicate the following:$\begin{array}{lrr}
&\text { This Year}&\text { Last Year }\
\text { Units Sold } &250,000&200,000\
\text { Sales Revenue } & £ 1,250,000 &£ 1,000,000\
\text { Less: Cost of Goods Sold } &\underline{875,000} &\underline{ 700,000} \
\text {Gross Margin } &375,000 & 300,000 \
\text {Less: Operating Expenses } &\underline{222,000} &\underline{210,000}\
\text {Net Operating Income } &£ 153,000& £ 90,000\
\end{array}$

-What is the company's contribution margin for this year?

Question

Compton Company is a wholesale distributor of educational CD-ROMs. The company's records indicate the following:$\begin{array}{lrr}
&\text { This Year}&\text { Last Year }\
  \text { Units Sold } &250,000&200,000\
 \text { Sales Revenue } & £ 1,250,000 &£ 1,000,000\
 \text { Less: Cost of Goods Sold } &\underline{875,000} &\underline{ 700,000} \
 \text {Gross Margin  } &375,000 & 300,000 \
 \text {Less: Operating Expenses  } &\underline{222,000} &\underline{210,000}\
 \text {Net Operating Income  } &£ 153,000& £ 90,000\
\end{array}$

-What is the company's contribution margin for this year?

Quizplus · Accepted Answer

The contribution margin is calculated as Sales Revenue minus Variable Costs. Assuming Cost of Goods Sold is the only variable cost, the contribution margin is £1,250,000 - £875,000 = £375,000.

Compton Company Is a Wholesale Distributor of Educational CD-ROMs -What Is the Company's Contribution Margin for This Year?