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14 January, 17:09

Bolding Inc.'s contribution margin ratio is 61% and its fixed monthly expenses are $47,500. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $137,000? a. $83,570b. $5,930c. $36,070d. $89,500

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  1. 14 January, 17:11
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    c. $36,070

    Explanation:

    contribution margin ratio is the ratio of the contribution to sales of an entity for a given period.

    contribution margin ratio = contribution/sales

    where contribution is the difference between sales and the variable cost

    Given;

    sales = $137,000

    contribution margin ratio = 61% = 0.61

    0.61 = contribution/$137,000

    contribution = $137,000 * 0.61

    = $83,570

    Net operating income is the difference between the contribution and the fixed cost.

    Fixed cost = $47,500

    Net operating income = $83,570 - $47,500

    = $36,070
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