Question

Bolding Inc.'s contribution margin ratio is 61% and its fixed monthly expenses are $42,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $126,000

Answer 1

Answer:

The correct answer is $34,860.

Explanation:

According to the scenario, the given data are as follows:

Sales = $126,000

Fixed monthly expense = $42,000

Contribution margin ratio = 61%

So, contribution margin amount = $126,000 × 61%

= $76,860

So, we can calculate the net operating income by using following formula:

Net operating income = contribution margin amount - Fixed monthly expense

= $76,860 - $42,000

= $34,860