Question

During its most recent fiscal year, Raphael Enterprises sold 250,000 electric screwdrivers at a price of $16.50 each. Fixed costs amounted to $625,000 and pretax income was $875,000. 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:

$2,625,000 is reported as variable cost.

Explanation:

As we know pretax income is calculated by deducting variable and fixed cost from thr revenue / slaes.

Pretax Income = Contribution Margin - Fixed cost

Contribution Margin = Pretax Income + Fixed cost

Contribution Margin = $875,000 + $625,000

Contribution Margin = $1,500,000

Contribution Margin = Revenue -  variable cost

$1,500,000 = ( 250,000 x 16.50 ) -  variable cost

$1,500,000 = $4,125,000 -  Variable cost

Variable cost = $4,125,000 - $1,500,000

Variable cost = $2,625,000