If the contribution?margin ratio is 0.30, targeted net income is $76,800, and targeted sales volume in dollars is $480,000, then total fixed costs are _____.
A)$23,000
B)$44,160
C)$67,200
D)$144,000

Question

Quizplus · Accepted Answer

Contribution margin = Sales - Variable costs
Contribution margin ratio = Contribution margin / Sales

Given:
Contribution margin ratio = 0.30
Targeted net income = $76,800
Targeted sales volume = $480,000

We can use the contribution margin ratio to find the contribution margin:

Contribution margin ratio = Contribution margin / Sales
0.30 = Contribution margin / $480,000
Contribution margin = $144,000

We can use the contribution margin to find the total fixed costs needed to reach the targeted net income:

Targeted net income = Contribution margin - Total fixed costs
$76,800 = $144,000 - Total fixed costs
Total fixed costs = $67,200

Therefore, the total fixed costs are $67,200. The correct answer is C.

If the Contribution?margin Ratio Is 0