Question

If contribution margin is $120,000, sales is $300,000, and net income is $40,000, then

variable and fixed expenses are
Variable Fixed
A) $180,000 $260,000
B) $180,000 $80,000
C) $80,000 $180,000
D) $420,000 $260,000

Answer 1

Given a contribution margin of $120,000, sales of $300,000, and net income of $40,000, the variable expenses are $180,000 and the fixed expenses are $80,000.

Step-by-step explanation:

To calculate the variable and fixed expenses given the contribution margin, sales, and net income, we need to understand the relationship between these figures. The contribution margin is calculated as sales minus variable expenses. The net income is found by subtracting the fixed expenses from the contribution margin.

In the scenario provided, the contribution margin is $120,000 which is the difference between sales of $300,000 and variable expenses. So, the variable expenses are $300,000 - $120,000 = $180,000. The net income is the result of subtracting fixed expenses from the contribution margin, which means $120,000 - Fixed Expenses = $40,000. Solving for Fixed Expenses gives us $120,000 - $40,000 = $80,000. Therefore, the correct option is B) $180,000 variable expenses and $80,000 fixed expenses.