Gayne Corporation's contribution margin ratio is 17% and its fixed monthly expenses are $45,000. If the company's sales for a month are $301,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

Gayne Corporation's contribution margin ratio is 17% and its fixed monthly expenses are $45,000. If the company's sales for a month are $301,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

Multiple Choice

• $51,170
• $256,000
• $204,830
• $6,170

  Correct

Explanation

Profit = (CM ratio × Sales) – Fixed expenses

= (0.17 × $301,000) – $45,000

= $51,170 – $45,000

= $6,170