Question

GPB's contribution margin ratio is 85% ( or .85) and its fixed monthly expenses are $63,000. Assume that the cost structure of GPB does not change.

Required:
Estimate of the company's net operating income in a month when sales are $103,000.

Answer 1

Net income= $24,550

Step-by-step explanation:

The contribution margin ratio is the result of deducting from sales all the variable costs, expressed as a percentage.

First, we need to calculate the total contribution margin:

Total contribution margin= sales*contribution margin ratio

Total contribution margin= 103,000*0.85

Total contribution margin= $87,550

Now, the net income:

Net income= 87,550 - 63,000

Net income= $24,550