Bowe Corporation's fixed monthly expenses are $21,000 and its contribution margin ratio is 61%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $74,000?
A)$7,860
B)$45,140
C)$24,140
D)$53,000

Question

Quizplus · Accepted Answer

First, we need to calculate the total contribution margin by multiplying the sales revenue by the contribution margin ratio:

$74,000 x 0.61 = $45,140

Then, we subtract the fixed expenses from the contribution margin to find the net operating income:

$45,140 - $21,000 = $24,140

Therefore, the best estimate of Bowe Corporation's net operating income in a month with $74,000 in sales is $24,140, which is choice C.

Bowe Corporation's Fixed Monthly Expenses Are $21,000 and Its Contribution