Ace Corporation's variable costs are equal to 43% of sales revenue. Their fixed costs per month are $600,000. Calculate the net income on sales of $2,000,000 per month.
A) $540,000
B) $260,000
C) $798,000
D) $1,140,000
E) $280,000

Question

Quizplus · Accepted Answer

Net income is calculated by subtracting total costs (variable and fixed) from sales revenue. Variable costs are 43% of $2,000,000, which equals $860,000. Fixed costs are $600,000. Total costs are $860,000 + $600,000 = $1,460,000. Sales revenue is $2,000,000, so net income is $2,000,000 - $1,460,000 = $540,000.

Ace Corporation's Variable Costs Are Equal to 43% of Sales