Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?
A) $57,500.
B) $122,500.
C) $130,000.
D) $181,250.
E) $252,500.

Question

Quizplus · Accepted Answer

Pretax income is calculated by subtracting total costs (fixed + variable) from sales. Variable costs are 40% of $325,000, which equals $130,000. Fixed costs are $72,500. Total costs are $130,000 + $72,500 = $202,500. Sales are $325,000, so pretax income = $325,000 - $202,500 = $122,500.

Management Anticipates Fixed Costs of $72,500 and Variable Costs Equal