During its most recent fiscal year, Raphael Enterprises sold 340,000 electric screwdrivers at a price of $19.20 each. Fixed costs amounted to $1,156,000 and pretax income was $1,496,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Question

Maddox Quinn

Business

24 May, 02:48

During its most recent fiscal year, Raphael Enterprises sold 340,000 electric screwdrivers at a price of $19.20 each. Fixed costs amounted to $1,156,000 and pretax income was $1,496,000. 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)

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Kenyon Zhang · Answer 1

Variable Costs should be recorded at $ 3876000

Explanation:

Since we know the total fixed costs of $ 1156000 and we have the total sales figure of $ 6528000 (340000 x $19.20) we can determine the variable cost amount by deducting the fixed costs and pretax income of $ 1496000 from the sales figure. Thus the variable cost becomes the balancing figure. Variable Costs is thus $ 3876000 as it's the balancing figure to get to a pretax income of $ 1496000