Question

During its most recent fiscal year, Simon Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Answer 1

Sales-VC=Contribution

Contribution-FC=600000

Contribution=1000000

Sales-VC=1000000

VC=200000*15-1000000

VC=2000000

d. $2,000,000.

Step-by-step explanation:

Answer 2

$2,000,000

Step-by-step explanation:

We know that,

Pre-tax income = Sales - variable cost - fixed cost

where,

Sales = Number of units sold × selling price per unit

= 200,000 units × $15

= $3,000,000

And, the other items values remain the same

Now put these values to the above formula

So, the value would be equal to

$600,000 = $3,000,000 - variable cost - $400,000

So, the variable cost = $2,000,000