Question

During its most recent fiscal year, Raphael Enterprises sold 360,000 electric screwdrivers at a price of $19.80 each. Fixed costs amounted to $1,296,000 and pretax income was $1,656,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?
a. $7,128,000.
b. $2,952,000.
c. $5,472,000.
d. $4,176,000.
e. $2,880,000.

Answer 1

Answer: Option (d) is correct.

Explanation:

Contribution margin = Fixed cost + Pretax Income

                                  = $1,296,000 + $1,656,000

                                  = $2,952,000

Variable cost = Sales - Contribution margin

                      = (360,000 units × $19.80 per unit) - $2,952,000

                      = $7,128,000 - $2,952,000

                      = $4,176,000