During its most recent fiscal year, Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Question

Killian Horne

Business

23 December, 01:36

During its most recent fiscal year, Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

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Answers (1)

Know the Answer?

Grant Montgomery · Answer 1

variable cost = $2,000,00

Explanation:

given data

sold = 200,000

price = $15 each

Fixed costs = $400,000

pretax income = $600,000

solution

we know that Pre-tax income that is express as

Pre-tax income = Sales - variable cost - fixed cost ... 1

and here sale is

Sales = Number of units sold * selling price per unit ... 2

put value in equation 2 we get sale

Sales = 200,000 units * $15

Sales = $3,000,000

now put all value in equation 1 and we get variable cost that is

$600,000 = $3,000,000 - variable cost - $400,000

solve it we get

variable cost = $2,000,00