Mitch Corporation's contribution margin ratio is 14% and its fixed monthly expenses are $87,000. If the company's sales for a month are $678,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

Question

Quizplus · Accepted Answer

The contribution margin is calculated as 14% of $678,000, which is $94,920. Subtracting the fixed expenses of $87,000 from the contribution margin gives a net operating income of $7,920.

Mitch Corporation's Contribution Margin Ratio Is 14% and Its Fixed