Question

Keaubie Company has the following: Total Sales: $500,000; Contribution Margin Ratio: 20%; Fixed Costs: $80,000; What is the amount of Keaubie Company's net income or net loss for the period? $20,000 net income $100,000 net income $20,000 net loss $100,000 net loss

Answer 1

(A) $20,000 net income

Step-by-step explanation:

`Sales *  $Contribution Margin Ratio = Total Contribution`

500,000 * 20% = 100,000

`Contribution - Fixed \: Cost = Result \: for \: the \: period`

100,000 - 80,000 = 20,000 net income

Remember: The contribution margin represent how much contribution bring to the table $1 of sales.

So if CMR equals to 20% each dollar generates $0.20 of contribution