Question

Gayne Corporation's contribution margin ratio is 18% and its fixed monthly expenses are $53,500. If the company's sales for a month are $318,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

Answer 1

Answer:

$3,740

Explanation:

The computation of net operating income is shown below:-

Contribution margin = Sales × CM ratio

= $318,000 × 18%

= $57,240

Net operating income = Contribution margin - fixed assets

= $57,240 - $53,300

= $3,740

So, we have applied the above formula.

Hence, the net operating income is $3,740 and the same is to be considered