Corner Cupcakes Co. is selling cupcakes for $8 for a box of four. Corner has fixed costs equaling $8,800 per month, and its accounting firm has determined the contribution margin ratio on each box of donuts to be 55%. Corner is currently averaging monthly sales of 2,600 boxes of donuts and the company has a tax rate of 40%. Based on this information, Corner Cupcakes has been averaging monthly net income after taxes of

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2,600 boxes times $8 per box is equal to $20,800 of sales revenues. If the contribution margin ratio is 55%, the contribution margin in dollars is equal to $20,800 × 55% = $11,440. Subtracting fixed costs of $8,800 gives operating income of $2,640. If the company has a 40% tax rate, then taxes will equal $2,640 × 40% = $1,056. Subtracting the tax amount from operating income will result in net income of $2,640 F1F1F1S1?F1F1F10 $1,056 = $1,584.