Question

Gayne Corporation's contribution margin ratio is 19% and its fixed monthly expenses are $50,500. If the company's sales for a month are $312,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

Answer 1

Answer:

$8,780

Explanation:

Gayne corporation has a contribution margin ratio of 19%

= 19/100

= 0.19

The fixed monthly expenses for Gayne corporation for a month is $50,500

If the company's sales for a month is $312,000, then the net operating income can be calculated as follows

Profit= (CM ratio×sales)-fixed expenses

= ( 19/100×$312,000)-$50,500

( 0.19× $312,000)-$50,500

= $59,280-$50,500

= $8,780

Hence the best estimate for Gayne corporation net operating income is $8,780