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Sales are $750,000 and variable cost of goods sold is $375,000. What is the manufacturing margin?
A$375,000
B$300,000
C$225,000
D$100,000
Answer & Solution
Correct answer: A. $375,000
1. Manufacturing margin is sales minus the variable cost of goods sold.
2. $750,000 minus $375,000 gives $375,000.
3. Variable selling and administrative costs are deducted after this line, not before it.
4. $300,000 is the contribution margin, which appears once those selling costs of $75,000 are also removed.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 6.1 Introduction_
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