Question

Bloom Company management predicts that it will incur fixed costs of $267,000 and earn pretax income of $353,100 in the next period. Its expected contribution margin ratio is 53%. Required: 1. Compute the amount of total dollar sales. 2. Compute the amount of total variable costs.

Answer 1

1.$1,170,000

2.$549,900

Step-by-step explanation:

1.Computation for the amount of total dollar sales.

Using this formula

Total Dollar Sales=Fixed costs plus pretax income/Contribution margin ratio

Let plug in the formula

Total dollar sales=$620,100 /53%

Total dollar sales =$1,170,000

Therefore the amount of total dollar sales is $1,170,000

2.Computation for the amount of total variable costs.

Sales$1,170,000

($620,100 /53%)

Fixed costs(267,000)

Pretax income(353,100)

Variable costs $549,900

Therefore the amount of total variable costs is $549,900