Question

During its most recent fiscal year, Raphael Enterprises sold 220,000 electric screwdrivers at a price of $15.60 each. Fixed costs amounted to $484,000 and pretax income was $704,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question

Answer 1

Answer:

$2,244,000

Explanation:

Given that;

Sales = 220,000

Price = $15.6 each

Fixed costs = $484,000

Pretax income = $704,000

Pretax income = Sales - Variable cost - Fixed cost,

But

Sales = Number of units sold × Selling price per unit

Sales = 220,000 units × $15.6

= $3,432,000

Therefore, recall that;

Pretax = Sales - Variable cost - Fixed cost

$704,000 = $3,432,000 - Variable cost - $484,000

Variable cost = $3,432,000 - $704,000 - $484,000

Variable cost = $2,244,000