4/ During its most recent fiscal year, Raphael Enterprises sold 240,000 electric

Question

4/ During its most recent fiscal year, Raphael Enterprises sold 240,000 electric screwdrivers at a price of $16.20 each. Fixed costs amounted to $576,000 and pretax income was $816,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Multiple Choice

$1,920,000.

$3,072,000.

$1,392,000.

$3,888,000.

$2,496,000.

5/ During a recent fiscal year, Creek Company reported pretax income of $120,000, a contribution margin ratio of 20% and total contribution margin of $350,000. Total variable costs must have been:

Multiple Choice

$1,150,000.

$1,400,000.

$600,000.

$1,750,000.

$2,350,000

6/ Watson Company has monthly fixed costs of $81,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $14,800, what dollar amount of sales must be made to produce the target income?

Multiple Choice

$239,500

$95,800

$202,500

$37,000

$165,500

Explanation / Answer

4) Calculation of variable cost: Contribution= Pretax income+ fixed costs                           =816000+576000= $1392000 Sales=240000*16.20= $3888000 Variale cost= sales-contribution                        =3888000-1392000=$2496000 So correct answer is $2496000 5)Calculation of variable cost: Sales= contribution margin/ contribution margin ratio          =350000/0.20=$1750000 Variable cost= Sales- contribution                           =1750000-350000=$1400000 So correct answer is $1400000 6) Calculation of dollar sales: Sales=(Fixed cost+target income)/contribution margin ratio          =(81000+14800)/0.40= $239500 So correct answer is $239500

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