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On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of the administrative expenses are fixed. The contribution margin for the University Store for the first quarter is:

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Answer:

Contribution Margin is $32.00.

Explanation:

Average book Price =                  $40.00

Less: Variable cost:

Selling expenses               $3.00

Administrative expenses $5.00                      ( 40 x 5% )

Total Variable                               $8.00

Contribution Margin                     $32.00

Contribution Margin % = $32 / 40 = 0.80 = 80%

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