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6 September, 21:16

Sarratt Corporation's contribution margin ratio is 78% and its fixed monthly expenses are $30,000. Assume that the company's sales for May are expected to be $89,000. Required: Estimate the company's net operating income for May, assuming that the fixed monthly expenses do not change.

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  1. 6 September, 21:35
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    The company's net operating income for May is $39,420

    Explanation:

    Sales revenue = $89,000

    Variable costs = $89,000 * (1 - 78%)

    = $89,000 * 0.22

    = $19,580

    Fixed costs = $30,000

    Therefore, net operating income = Sales revenue - variable costs - fixed costs

    = $89,000 - $19,580 - $30,000

    = $ 39,420
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