Creswell Corporation's fixed monthly expenses are $30,000 and its contribution margin ratio is 63%. 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 $92,000?

Question

Quizplus · Accepted Answer

To find the net operating income, we first need to calculate the company's total contribution margin:

Total Sales - Variable Expenses = Contribution Margin

$92,000 - (37% x $92,000) = $58,040 (rounded)

Now, we can find the net operating income by subtracting the fixed expenses from the contribution margin:

Contribution Margin - Fixed Expenses = Net Operating Income

$58,040 - $30,000 = $28,040 (rounded)

Therefore, the best estimate of the company's net operating income in a month when sales are $92,000 is $27,960. Option C is the correct answer.

Creswell Corporation's Fixed Monthly Expenses Are $30,000 and Its Contribution