Question

Creswell Corporation's fixed monthly expenses are $25,000 and its contribution margin ratio is 67%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $82,000? Multiple Choice $2,060 $54,940 $29,940 $57000

Answer 1

The correct option is $29940 as shown in the workings below

Step-by-step explanation:

Contribution margin = Sales * Contribution margin ratio

Contribution margin=67%

Sales=$82000

Contribution margin=$82000*67%

Contribution margin=$54940

Net operating income=contribution -fixed costs

where fixed costs is $25000

Net operating margin=$54940-$25000

Net operating margin=$29940

Choosing $54940 is wrong because the requirement was not contribution margin

Answer 2

Step-by-step explanation:

Formula to be used is Contribution margin = Sales * Contribution margin ratio

Contribution Margin = $82,000 * 67% = $82,000*0.67 = 54,940

Net operating income = Contribution margin - Fixed expenses

Net operating income = $54,940 - $25,000 = $29,940

So the answer is option C