Question

During a recent fiscal year, Creek Company reported pretax income of $123,000, a contribution margin ratio of 25% and total contribution margin of $380,000. Total variable costs must have been:_________. a. $1028,000 b. $1,140,000 c. $492,000 d. $1,520,000 $2,012,000

Answer 1

b. $1,140,000

Step-by-step explanation:

To get the total variable cost, we need to first get the sales.

Sales = Contribution / Margin ratio

= $380,000 / 25%

= $1,520,000

Therefore,

Total variable costs would be

= $1,520,000 * 75% [100% - 25%]

= $1,140,000