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

11ea7998_5c86_80d9_911b_630fad3487a4_TB2627_00_TB2627_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%