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If a company has a total revenue of $500,000 and total variable costs of $300,00

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Question: If a company has a total revenue of $500,000 and total variable costs of $300,000, what is the total contribution margin?

Options:

  1. $200,000
  2. $300,000
  3. $400,000
  4. $100,000

Correct Answer: $200,000

Solution: 

Total Contribution Margin = Total Revenue - Total Variable Costs = $500,000 - $300,000 = $200,000.

If a company has a total revenue of $500,000 and total variable costs of $300,00

Practice Questions

Q1
If a company has a total revenue of $500,000 and total variable costs of $300,000, what is the total contribution margin?
  1. $200,000
  2. $300,000
  3. $400,000
  4. $100,000

Questions & Step-by-Step Solutions

If a company has a total revenue of $500,000 and total variable costs of $300,000, what is the total contribution margin?
  • Step 1: Identify the total revenue, which is $500,000.
  • Step 2: Identify the total variable costs, which is $300,000.
  • Step 3: Use the formula for total contribution margin: Total Contribution Margin = Total Revenue - Total Variable Costs.
  • Step 4: Substitute the values into the formula: Total Contribution Margin = $500,000 - $300,000.
  • Step 5: Perform the subtraction: $500,000 - $300,000 = $200,000.
  • Step 6: The total contribution margin is $200,000.
  • Contribution Margin – The contribution margin is the difference between total revenue and total variable costs, indicating how much revenue is available to cover fixed costs and contribute to profit.
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