Question

Graduating Tiger, Inc has the following costs: Total variable expenses are \$42,000, total fixed expenses are...

Graduating Tiger, Inc has the following costs: Total variable expenses are \$42,000, total fixed expenses are \$28,000, and sales revenue to breakeven is \$35,000. What is current operating income?

\$140,000

\$7,000

\$210,000

\$28,000

Break even sales = \$35,000

Fixed expense = \$28,000

Break even sales = Fixed expense/Contribution margin ratio

35,000 = 28,000/Contribution margin ratio

Contribution margin ratio = 80%

Total variable expense = \$42,000

Since contribution margin is 80%, hence variable expense must be 20% of sales.

total variable expense = sales x 20%

42,000 = Sales x 0.2

Sales = \$210,000

 Income Statement Sales 210,000 Variable expense -42,000 Contribution margin 168,000 Fixed expense -28,000 Operating income \$140,000

Current operating income is \$140,000.

First option is correct.

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