Stain Manufacturer's contribution margin is $200, after-tax income is $96, and the tax rate is 40%. What are the fixed costs?

Question

Quizplus · Accepted Answer

To find fixed costs, we need to use the contribution margin ratio formula:
Contribution Margin Ratio = Contribution Margin / Revenue
We know that the Contribution Margin is $200 and the after-tax income is $96, so we can calculate the revenue as follows:
Revenue = Contribution Margin + Fixed Costs + Taxes
$96 = $200 + Fixed Costs - 0.4($200 + Fixed Costs)
$96 = $200 + Fixed Costs - $80 - 0.4Fixed Costs
$96 = $120 + 0.6Fixed Costs
0.6Fixed Costs = -$24
Fixed Costs = -$24 / 0.6
Fixed Costs = $40
Therefore, the fixed costs are $40, and the answer is C.

Stain Manufacturer's Contribution Margin Is $200, After-Tax Income Is $96