Question

Calculating contribution margin and operating income, variable costing

Calculate the contribution margin and operating income for June using variable costing.

Use the following information for Short Exercises S21-4 and S21-5.

Dracut Company reports the following information for June:

Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000

Short answer

Answer

Dracut Company’s gross profit is $347,000 and operating income is $70,000.

Step-by-step solution

Calculation of contribution margin using variable costing

Particulars	Amount
Net sales revenue	$755,000
Less: Variable costs
Variable cost of goods sold	$240,000
Variable selling and administrative costs	$168,000
Contribution margin	$347,000

Statement showing operating income

Particulars	Amount
Net sales revenue	$755,000
Less: Variable costs
Variable cost of goods sold	$240,000
Variable selling and administrative costs	$168,000
Contribution margin	$347,000
Less: Fixed costs ($198,000+$79,000)	$277,000
Operating Income	$70,000