Question

For Vaughn Manufacturing, sales revenue is $3000000, fixed expenses are $740000, and the contribution margin ratio is 34%. What is the company’s net income? Select answer from the options below -$1020000 -$251600 -$280000 -$768400

Answer 1

Vaughn Manufacturing's net income is calculated by taking the sales revenue multiplied by the contribution margin ratio to determine the contribution margin, and then subtracting the fixed expenses. The net income turns out to be $280,000.

Step-by-step explanation:

To calculate Vaughn Manufacturing's net income, we start by finding the total contribution margin, which is the sales revenue times the contribution margin ratio. From there, we subtract the fixed expenses to find the net income. The contribution margin can be calculated as follows:

Sales Revenue: $3,000,000

Contribution Margin Ratio: 34%

Contribution Margin = Sales Revenue × Contribution Margin Ratio

Contribution Margin = $3,000,000 × 0.34

Contribution Margin = $1,020,000

Now, we can find the net income by subtracting the fixed expenses from the contribution margin:

Fixed Expenses: $740,000

Net Income = Contribution Margin - Fixed Expenses

Net Income = $1,020,000 - $740,000

Net Income = $280,000

Therefore, Vaughn Manufacturing's net income is $280,000. The correct answer from the options given is -$280,000, considering negative value is a typo error because the calculations indicate a positive net income.