A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit (loss) was

A) $140,000
B) $(30,000)
C) $370,000
D) $670,000

Question

Kiera Leighton · Accepted Answer

Final Answer : B, Explanation :  First, calculate the total variable costs:Variable costs = 70% x $1,000,000 = $700,000Next, calculate the contribution margin:Contribution margin = Sales - Variable costs = $1,000,000 - $700,000 = $300,000Then, calculate the breakeven point:Breakeven point = Fixed costs / Contribution margin = $330,000 / $300,000 = 1.1This means that the company needs to generate $1.1 million in sales to break even. Since actual sales were only $1 million, the company operated at a loss.Operating loss = Sales - Variable costs - Fixed costs = $1,000,000 - $700,000 - $330,000 = -$30,000Therefore, the answer is B) $(30,000).

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit (loss) was

A) $140,000
B) $(30,000)
C) $370,000
D) $670,000

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A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit (loss) wasA) $140,000B) $(30,000) C) $370,000D) $670,000

Definitions

Learning Objectives

Learning Objectives

Related questions

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit (loss) was

A) $140,000
B) $(30,000)
C) $370,000
D) $670,000