65. Contribution margin $200,000; Less fixed costs $150,000; Net income $50,000. What is the forecasted net income for the sale of 14,000 shoes based on these actual results?
Answer: C
The forecasted net income for the sale of 14,000 shoes is $130,000.
Based on the contribution margin and fixed costs, the forecasted net income can be calculated by determining the contribution margin per shoe and then applying it to the projected sales of 14,000 shoes.
A) $40,000
This option is incorrect because it underestimates the contribution margin and does not account for the fixed costs accurately. The calculation does not align with the contribution margin generated from selling 14,000 shoes.
B) $70,000
While this option is a possible outcome, it is still incorrect as it does not reflect the total contribution margin calculated from the projected sales. The net income forecast should be higher than this value based on the contribution margin derived from the actual results.
C) $130,000
This option is correct as it accurately reflects the forecasted net income based on the contribution margin of $200,000, fixed costs of $150,000, and the projected sales of 14,000 shoes. The calculation shows that selling more shoes increases the contribution margin, resulting in a net income of $130,000.
D) $230,000
This option is incorrect as it suggests a net income that exceeds the total contribution margin available. The fixed costs must be considered, and this figure does not accurately reflect the relationship between sales, contribution margin, and fixed costs.
Conclusion
The calculation leading to the correct answer of $130,000 demonstrates a clear understanding of how contribution margin and fixed costs interact to determine net income. All other options fail to accurately represent the calculations necessary to arrive at the correct forecasted net income based on the given data.