Question

Management anticipates fixed costs of $74,200 and variable costs equal to 35% of sales. What will pretax income equal if sales are $342,000?
A. $119,700.
B. $148,100.
C. $267,800.
D. $45,500.
E. $183,750.

Answer 1

Answer:

Pretax profit= $148,100

Explanation:

Giving the following information:

Management anticipates fixed costs of $74,200 and variable costs equal to 35% of sales.

Sales= $342,000

To calculate the pretax profit, we need to use the following formula:

Pretax profit= sales*contribution margin rate - fixed costs

Contribution margin rate= 1 - varaible cost rate

Contribution margin rate= 0.65

Pretax profit= 342,000*0.65 - 74,200

Pretax profit= $148,100