Tadman Inc.reported the following results from last year's operations:
At the beginning of this year,the company has a $800,000 investment opportunity that involves sales of $2,800,000,fixed expenses of $756,000,and a contribution margin ratio of 30% of sales.
If the company pursues the investment opportunity and otherwise performs the same as last year,the combined margin for the entire company will be closest to:
A) 1.0%
B) 3.0%
C) 5.0%
D) 3.8%

Question

Tadman Inc.reported the following results from last year's operations:
 At the beginning of this year,the company has a $800,000 investment opportunity that involves sales of $2,800,000,fixed expenses of $756,000,and a contribution margin ratio of 30% of sales.
If the company pursues the investment opportunity and otherwise performs the same as last year,the combined margin for the entire company will be closest to:
A) 1.0% 
B) 3.0% 
C) 5.0% 
D) 3.8%

Quizplus · Accepted Answer

11ea7761_1660_14d1_81a5_8b6d1e1a6653_TB2580_00 Net operating income = $336,000 + $84,000 = $420,000
Sales = $8,400,000 + $2,800,000 = $11,200,000
Margin = Net operating income ÷ Sales = $420,000 ÷ $11,200,000 = 3.8%