Question

During its most recent fiscal year, Raphael Enterprises sold 270,000 electric screwdrivers at a price of $17.10 each. Fixed costs amounted to $729,000 and pretax income was $999,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question

Answer 1

$2,889,000

Step-by-step explanation:

Sales units = 270,000 units

Sale Price = $17.10

Fixed cost = $729,000

Sales Value = 270,000 * $17.10

Sales Value = $4,617,000

Contribution Margin = Sales- Fixed cost

Contribution Margin = $4,617,000 - $729,000

Contribution Margin = $3,888,000

Variable Cost = Contribution margin- Pretax income

Variable Cost = $3,888,000 - $999,000

Variable Cost = $2,889,000

So, $2,889,000 is the amount that should have been reported as variable costs in the company's contribution margin income statement for the year in question.