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Variable costs as a percentage of sales for Craig, Inc. are 70%, current sales are $600,000, and income from operations is $70,000. What is the amount of fixed costs?

a. $530,000
b. $180,000
c. $310,000
d. $110,000

User Kailee
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1 Answer

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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

User BenP
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