ABC Company estimates the following data for the coming month Total variable cos

ID: 2591121 • Letter: A

Question

ABC Company estimates the following data for the coming month

Total variable costs

$35,000.00

Income tax rate

25%

Contribution margin percentage

40%

Estimated monthly operating fixed costs

$16,000.00

Required minimum net income as percentage of total sales

10%

Find the estimated operating income for the coming month.

A. $1,500.00

B. $2,500.00

C. $4,500.00

D. $7,333.33

ABC Company estimates the following data for the coming month

Total variable costs

$35,000.00

Income tax rate

25%

Contribution margin percentage

40%

Estimated monthly operating fixed costs

$16,000.00

Required minimum net income as percentage of total sales

10%

Contribution margin=Sales-Variable costs

Hence Variable costs=(100-40)=60% of sales

Hence total sales=(35000/0.6)=$58,333.33(Approx)

Hence Contribution margin=(0.4*58,333.33)=$23,333.33

Less:Fixed costs=$16000

estimated operating income for the coming month=$7333.33(Approx)(D).

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