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dusya [7]
3 years ago
13

Jilk Inc.'s contribution margin ratio is 60% and its fixed monthly expenses are $48,000. Assuming that the fixed monthly expense

s do not change, what is the best estimate of the company's net operating income in a month when sales are $138,000
Business
1 answer:
Kryger [21]3 years ago
4 0

Answer:

The best estimate of the company's net operating income in a month is  <u>$34,800</u>.

Explanation:

This can be calculated using the following steps:

Step 1: Calculation of contribution margin

This can be calculated using the formula for calculating the contribution margin ratio as follows:

Contribution margin ratio = Contribution margin / Sales ........... (1)

where,

Substituting the values in the question into equation (1) and solve for contribution margin, we have:

60% = Contribution margin / $138,000

Contribution margin = 60% * $138,000 = $82,800

Step 2: Estimation of the company's net operating income in a month

This can be calculated using the following formula:

Net operating income = Contribution margin - Fixed expenses ......... (2)

Substituting the $82,800 obtained in Step 1 for contribution margin and the fixed monthly expenses of $48,000 in the question into equation (2), we have:

Net operating income = $82,800 - $48,000 = $34,800

Conclusion

From Step 2 above, the best estimate of the company's net operating income in a month is therfore <u>$34,800</u>.

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