A firm operated at 80 of capacity for the past year during w

A firm operated at 80% of capacity for the past year during which fixed costs were $19 000 var a e costs were 6 % of sales, and Sales were $ 64 0 0 e at n profit as $366,320 $597,680 $170,320 ? $136,256

Solution

Solution:

Sales = $964,000

Variable cost = $964,000 * 62% = $597,680

Contribution margin = $964,000 - $597,680 = $366,320

Fixed costs = $196,000

Operating profit = Contribution margin - Fixed costs = $366,320 - $196,000 = $170,320

Hence 3rd option is correct.