Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?
A) $130,000.
B) $122,500.
C) $181,250.
D) $57,500.
E) $252,500.

Question

Quizplus · Accepted Answer

First, we need to calculate the total costs:

Variable costs = 40% x $325,000 = $130,000
Fixed costs = $72,500
Total costs = $130,000 + $72,500 = $202,500

Then, we can calculate pretax income:

Pretax income = Sales - Total costs
Pretax income = $325,000 - $202,500
Pretax income = $122,500

Therefore, the answer is B) $122,500.

Management Anticipates Fixed Costs of $72,500 and Variable Costs Equal