Question

If the contribution margin ratio is 0.4​, targeted operating income is $70,000​, and targeted sales volume in dollars is $250,000​, then total fixed costs are​ ________.

Answer 1

$30,000

Explanation:

For the computation of total fixed cost first we need to compute the contribution margin ratio which is shown below:-

Contribution margin ratio = Contribution margin ÷ Sales

0.4 = Contribution margin ÷ $250,000

Contribution margin = $250,000 × 0.4

= $100,000

Total fixed expenses = Contribution margin - operating income

= $100,000 - $70,000

= $30,000

So, we have applied the above formula.