It costs homer's manufacturing $0.75 to produce baseballs and homer sells them for $4.00 a piece. homer pays a sales commission of 5% of sales revenue to his sales staff homer also pays $12,000 a month rent for his factory and store, and also pays $75,000 a month to his staff in addition to the commissions. homer sold 67,500 baseballs in june. if homer prepares a contribution margin income statement for the month of june, what would be his contribution margin? a) $205,875b) $334,125c) $64,125d) $270,000

A) $205,875

Explanation:

The formula to compute the contribution margin is shown below:

Contribution margin = Sales - Variable cost

where,

Sales = Number of basketballs sold × selling price per unit

         = 67,500 × $4

        = $270,000

And, the variable cost = Sales commission + manufacturing cost

The sales commission = Sales revenue × commission percentage

                                      = $270,000 × 5%

                                      = $13,500

And, the manufacturing cost equal to

= Number of basket balls sold × price per unit

= 67,500 × $0.75

= $50,625

So, the variable cost equal to

= $13,500 + $50,625

= $64,125

Now put these values to the above formula  

So, the value would equal to

= $270,000 - $64,125

= $205,875

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