Hinge Manufacturing's cost of goods sold is $420,000 variable and $240,000 fixed. The company's selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company's sales is $1,580,000, what is its net income?
A) $260,000
B) $860,000
C) $920,000
D) $980,000

Question

Quizplus · Accepted Answer

Net income is calculated by subtracting total expenses from sales. Total expenses include both cost of goods sold (COGS) and selling and administrative expenses. COGS = $420,000 (variable) + $240,000 (fixed) = $660,000. Selling and administrative expenses = $300,000 (variable) + $360,000 (fixed) = $660,000. Total expenses = $660,000 (COGS) + $660,000 (selling and administrative expenses) = $1,320,000. Sales = $1,580,000. Therefore, net income = Sales - Total expenses = $1,580,000 - $1,320,000 = $260,000.

Hinge Manufacturing's Cost of Goods Sold Is $420,000 Variable and $240,000