Let's break down the problem to compute the operating income and total contribution margin for Sam.

1. Contribution Margin (CM) Per Sandwich:

Contribution margin per sandwich is the difference between the selling price and the variable cost (the cost per sandwich). $\text{CM per sandwich} = \text{Selling price} - \text{Variable cost}$ $\text{CM per sandwich} = 8.40 - 5.04 = 3.36$

2. Total Contribution Margin:

Total contribution margin is the contribution margin per sandwich multiplied by the total number of sandwiches sold. $\text{Total CM} = \text{CM per sandwich} \times \text{Number of sandwiches sold}$ $\text{Total CM} = 3.36 \times 2880 = 9,676.80$

3. Fixed Costs:

Sam has a fixed monthly cost of $1,428 (truck and campus permit).

4. Operating Income:

Operating income is calculated by subtracting the fixed costs from the total contribution margin. $\text{Operating Income} = \text{Total CM} - \text{Fixed Costs}$ $\text{Operating Income} = 9,676.80 - 1,428 = 8,248.80$

Summary:

• Total Contribution Margin: $9,676.80
• Operating Income: $8,248.80

Would you like further details or have any questions about the steps?

Here are 5 questions to expand on the topic:

1. How would the operating income change if the fixed costs increased by 10%?
2. What would be the breakeven point in terms of sandwiches sold?
3. How does contribution margin analysis help in decision-making?
4. What happens to operating income if the variable cost per sandwich rises to $6?
5. How would a 15% increase in sandwich sales affect the total contribution margin?

Tip: Understanding contribution margin helps determine how much of each sale contributes to covering fixed costs and generating profit.