Under Variable costing, fixed expenses:

a. Are subtracted from sales to arrive at the contribution margin

b. Are subtracted from sales to arrive at the gross profit

c. Are expensed in the current period

d. A and C

Assume that Quality Motors use Variable Costing:

Sales:	$34,000,000
Cost of Direct Materials used in production:	$6,200,000
Cost of Direct Labor wages:	$8,235,500
Variable Manufacturing Overhead:	$7,080,000
Fixed Manufacturing Overhead:	$4,950,000
Fixed Selling Expenses:	$2,500,000

What is Quality Motors contribution margin and net income?

a. Contribution Margin: $9,984,500 Net Income: $5,034,500

b. Contribution Margin: $12,484,500 Net Income: $5,034,500

c. Contribution Margin: $19,564,500 Net Income: $5,034,500

d. None of the above, the answer should include gross profit not contribution margin