Creswell Corporation's fixed monthly expenses are $29,000 and its contribution margin ratio is 56%. 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 $95,000?

Question

Business

Jimena Carrillo

6 January, 15:32

Creswell Corporation's fixed monthly expenses are $29,000 and its contribution margin ratio is 56%. 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 $95,000?

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Answers (1)

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Jude Lamb · Answer 1

the company will have an operating income of $24,200 at sales level of $95,000

Explanation:

Target profit formula:

Fixed cost 29,000

Sales revenue 95,000

Contribution Margin Ratio 56% = 0.56

from each dollar of sales 56 cents remains to afford fixed cost and make a gain:

95,000 x 0.56 = 53,200 contribution

less 29,000 fixed cost = 24,200