Answer the Following Questions Using the Information Below:
Ceylon Tea

question 152

Multiple Choice

Answer the following questions using the information below:
Ceylon Tea Products has an exclusive contract with West Sydney Tea Importers Corporation.Calamine and Ceylon are two brands of teas that are imported and sold to retail outlets.The following information is provided for the month of March:
$$\begin{array}{c}&&&&&&&&&&&&&{ \text { Actual } } &&&&&&& { \text { Budget } } \\\end{array}\\\begin{array} { l r r r r r } & \text { Calamine } & \text { Ceylon } & & \text { Calamine } & \text { Ceylon } \\\text { Sales in kg } & 1850 \mathrm {~kg} & 1650 \mathrm {~kg} & & 2000 \mathrm {~kg} & 1500 \mathrm {~kg} \\\text { Price per kg } & \$ 2.50 & \$ 2.50 & & \$ 2.00 & \$ 3.00 \\\text { Variable cost per kg } & \underline { 1.00 } & \underline { 2.00 } && \underline { 1.00 } & \underline { 1.50 } \\\text { Contribution margin } & \underline {\$ 1.50} & \underline { \$ 0.50} & & \underline { \$ 1.00} & \underline { \$ 1.50}\end{array}$$ Budgeted and actual fixed corporate-sustaining costs are $1750 and $2000,respectively.
-What is the actual contribution margin for the month?

• A)$4250
• B)$3750
• C)$4325
• D)$3600

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Definitions:

Capital Lease

A lease agreement in which the lessee essentially buys an asset and borrows the funds through the lease, recording the asset and the liability on their balance sheet.

Implicit Interest Rate

An interest rate inferred from leasing transactions or other contractual arrangements, calculated based on the present value of payments and the initial value of the leased asset.

Present Value Factors

A mathematical formula used to determine the present value of a series of future cash flows by applying a specific discount rate.

Capital Lease

A lease classified as a purchase by the lessee for accounting purposes, where the lessee essentially buys the leased asset.