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1 October, 21:21

Maack Corporation's contribution margin ratio is 18% and its fixed monthly expenses are $52,000. If the company's sales for a month are $315,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change. a. $206,300b. $4,700c. $263,000d. $56,700

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  1. 1 October, 21:29
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    The company's net operating income is b. $4,700

    Explanation:

    The contribution margin ratio is calculated by using following formula:

    Contribution margin ratio = (Sales - Total Variable cost) / Sales

    Total Variable cost = Sales x (1 - Contribution margin ratio)

    Maack Corporation's contribution margin ratio is 18% and the company's sales for a month are $315,000.

    Total Variable cost = $315,000 x (1 - 18%) = $258,300

    The company's net operating income = Sales - Total Variable cost - Fixed expenses = $315,000 - $258,300 - $52,000 = $4,700
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Home » Business » Maack Corporation's contribution margin ratio is 18% and its fixed monthly expenses are $52,000. If the company's sales for a month are $315,000, what is the best estimate of the company's net operating income?
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