For the year just ended, Silverstone Company's sales revenue was $450,000. Silverstone's fixed costs were $120,000 and its variable costs amounted to $270,000. For the current year, sales are forecasted at $500,000. If the fixed costs do not change, Silverstone's profits this year will be:

Question

Quizplus · Accepted Answer

Silverstone's profits will be $80,000 as shown below.
Contribution margin = 1 - ($270,000 ÷ $450,000)
= 40%
Profit = (.4 x $500,000) - $120,000
= $80,000

For the Year Just Ended, Silverstone Company's Sales Revenue Was