To solve for the amount of fixed costs, we can use the formula:
Income from operations = Sales - Variable costs - Fixed costs
We are given that variable costs as a percentage of sales are 70%, or 0.7 as a decimal. Therefore, variable costs can be calculated as:
Variable costs = 0.7 x Sales
Variable costs = 0.7 x $600,000
Variable costs = $420,000
We are also given that income from operations is $70,000. Therefore, we can rearrange the formula to solve for fixed costs:
Fixed costs = Sales - Variable costs - Income from operations
Fixed costs = $600,000 - $420,000 - $70,000
Fixed costs = $110,000