Business Degree Certification Practice Test

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Prepare for your Business Degree Certification Test with our comprehensive quiz. Utilize flashcards, multiple choice questions, hints, and explanations to build your proficiency. Excel in your exam!

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What was the income from operations for a company with $920,000 in sales, fixed costs of $160,000, and a contribution margin ratio of 30 percent?

$276,000
$484,000
$116,000
$644,000

The correct answer is: $116,000

To determine the income from operations, we start by calculating the contribution margin, which is the amount remaining from sales after variable costs have been deducted. The contribution margin ratio is given as 30 percent, meaning that 30 percent of sales contributes to covering fixed costs and profit. First, we calculate the total contribution margin based on sales: 1. Calculate the contribution margin: Contribution Margin = Sales × Contribution Margin Ratio Contribution Margin = $920,000 × 0.30 Contribution Margin = $276,000 Next, we find the income from operations by subtracting fixed costs from the total contribution margin: 2. Calculate income from operations: Income from Operations = Contribution Margin - Fixed Costs Income from Operations = $276,000 - $160,000 Income from Operations = $116,000 This analysis shows that the income from operations is indeed $116,000, thus confirming the correctness of the conclusion drawn. The other options would not accurately reflect the income from operations given the specified sales, fixed costs, and contribution margin ratio.