By multiplying ________ and then subtracting fixed costs, managers can quickly forecast the operating income.
A)projected sales units by the contribution margin ratio
B)projected sales revenue by the contribution margin ratio
C)projected sales revenue by the unit contribution margin
D)projected sales units by the variable cost ratio

Question

Quizplus · Accepted Answer

The correct method to quickly forecast operating income involves multiplying the projected sales revenue by the contribution margin ratio and then subtracting fixed costs. The contribution margin ratio is calculated as (Sales - Variable Costs) / Sales, and it represents the percentage of each sales dollar that contributes to covering fixed costs and generating profit.

By Multiplying ________ and Then Subtracting Fixed Costs, Managers Can