The accountant of a local retailer prepared the following income statement for this month:

 

Sales revenue                                     $600,000

Cost of goods sold                            $250,000

Gross margin                                     $350,000

Less operating expenses        

Selling expense                $73,000    

Administrative expense     $65,000       $138,000

Net operating income                         $212,000  

 

The retailer sells its coats for $150 each. Selling expenses consist of a commission of $5 per coat plus fixed costs. Each coat costs $62.50 from the distributor. Administrative expenses consist of a variable component equal to 5% of sales plus fixed costs. In order to increase net operating income in the coming year, management is considering increasing advertising expenses.

 

What would be the total contribution margin reported on this retailer’s contribution format income statement?

    $550,000

    $350,000

    $212,000

    $300,000