Asked by Abigail Zurita on Jun 29, 2024
Verified
Sarratt Corporation's contribution margin ratio is 62% and its fixed monthly expenses are $91,000.Assume that the company's sales for May are expected to be $193,000.
Required:
Estimate the company's net operating income for May, assuming that the fixed monthly expenses do not change.Show your work!
Fixed Monthly Expenses
Recurring expenses that do not vary in amount each month, such as rent or mortgage payments.
Net Operating Income
Earnings from a company's everyday business operations, excluding extraordinary items and other non-operating expenses.
- Lay out and scrutinize contribution format income statements in a variety of situations.
- Evaluate the repercussions of sales volume adjustments on net operating income.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
Profit = (CM ratio × Sales)- Fixed expenses
= (62% × $193,000)- $91,000
= $119,660 - $91,000 = $28,660
= (62% × $193,000)- $91,000
= $119,660 - $91,000 = $28,660
Learning Objectives
- Lay out and scrutinize contribution format income statements in a variety of situations.
- Evaluate the repercussions of sales volume adjustments on net operating income.
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