Question

If the contribution margin ratio for france company is 39%, sales were $469,000, and fixed costs were $105,000, what was the income from operations?

a.$156,600

b.$107,000

c.$39,680

d.$49,600

Answer 1

The contribution margin ratio is 39% for the France company. To calculate the income from operations, the contribution margin needs to be found by using the given ratio and sales revenue. Finally, the fixed costs can be subtracted from the contribution margin to calculate the income from operations.

Step-by-step explanation:

The contribution margin ratio is 39%. This means that 39% of each sales dollar contributes towards covering the fixed costs and profit. To calculate the income from operations, we need to find the contribution margin. The formula for contribution margin is sales revenue minus variable costs. Since the contribution margin ratio is given, we can express it as a decimal by dividing it by 100.

Contribution margin ratio = Contribution margin / Sales revenue

We know the contribution margin ratio is 39% or 0.39, and the sales revenue is $469,000. Let's substitute these values into the formula:

0.39 = Contribution margin / $469,000

Solving for the contribution margin, we have:

Contribution margin = 0.39 * $469,000 = $182,910

Finally, to calculate the income from operations, we subtract the fixed costs from the contribution margin:

Income from operations = Contribution margin - Fixed costs = $182,910 - $105,000 = $77,910