Fanatic Footwear has two store locations, midtown and at the beach.During October, the company reported net income of $80,000 on sales of $450,000.Sales in the midtown store were $170,000 and variable costs in the beach store were 40% of sales.The contribution margin in the midtown store was $85,000.If total direct fixed costs are $40,000, how much are total fixed costs for Fanatic Footwear?
A)$93,000
B)$150,000
C)$370,000
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Total fixed costs include both direct fixed costs and any indirect fixed costs. Given the information, we can calculate the total fixed costs by first determining the total contribution margin and then subtracting it from the sales to find total fixed costs. The total contribution margin is the sum of the contribution margin from the midtown store ($85,000) and the contribution margin from the beach store (calculated as sales minus variable costs, which are 40% of beach sales, or 60% of $280,000 = $168,000). Thus, the total contribution margin is $85,000 (midtown) + $168,000 (beach) = $253,000. The net income is given as $80,000, which is the result after subtracting total fixed costs from the total contribution margin. Therefore, total fixed costs = total sales - total contribution margin + net income = $450,000 - $253,000 + $80,000 = $277,000, which is not an option provided.

Fanatic Footwear Has Two Store Locations, Midtown and at the Beach.During