Question

Bloom Company management predicts that it will incur fixed costs of $259,000 and earn pretax income of $493,100 in the next period. Its expected contribution margin ratio is 69%.

Required:1. Compute the amount of total dollar sales.2. Compute the amount of total variable costs.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Fixed costs= $259,000

Pretax income= $493,100

Contribution margin ratio= 0.69

The contribution margin ratio is the percentage of sales remaining after deducting all variable components.

First, we need to calculate the total contribution margin:

Total contribution margin= pretax income + fixed costs

Total contribution margin= 493,100 + 259,000= $752,100

Now, total sales:

Total sales= total contribution margin/contribution margin ratio

Total sales= 752,100/0.69= $1,090,000

Finally, total variable costs:

Total variable costs= total sales - total contribution margin

Total variable costs= 1,090,000 - 752,100= $337,900