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27 July, 16:17

Gayne Corporation's contribution margin ratio is 19% and its fixed monthly expenses are $52,500. If the company's sales for a month are $316,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

(A) $203,460

(B) $7,540

(C) $263,500

(D) $60,040

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Answers (1)
  1. 27 July, 16:45
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    Option (B) is correct.

    Explanation:

    Given that,

    Contribution margin ratio = 19%

    Fixed monthly expenses = $52,500

    Sales for a month = $316,000

    Contribution:

    = Contribution margin ratio * Sales for a month

    = 19% * $316,000

    = $60,040

    Net operating income:

    = Contribution - Fixed monthly expenses

    = $60,040 - $52,500

    = $7,540

    Therefore, the company's net operating income is $7,540.
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