During its most recent fiscal year, Raphael Enterprises sold 340,000 electric screwdrivers at a price of $19.20 each. Fixed costs amounted to $1,156,000 and pretax income was $1,496,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Variable costs=$3,876,000

Explanation:

Given Data:

Fixed costs amounted=$1,156,000

pretax income=$1,496,000.

Units Sold=340,000

Price of each unit sold=$19.20

Required::

Variable costs in the company's contribution margin income statement for the year =?

Solution:

Pretax Income=Revenue-Fixed costs-Variable costs

Revenue=Units Sold*Price of each unit sold

Revenue=340,000*$19.20

Revenue=$6,528,000

Pretax Income=Revenue-Fixed costs-Variable costs

$1,496,000=$6,528,000-$1,156,000-Variable costs

Variable costs=$6,528,000-$1,156,000-$1,496,000

Variable costs=$3,876,000

Variable Costs should be recorded at  $ 3876000

Explanation:

Since we know the total fixed costs of $ 1156000 and we have the total sales figure of $ 6528000  (340000 x $19.20) we can determine the variable cost amount by deducting the fixed costs and pretax income of $ 1496000 from the sales figure. Thus the variable cost becomes the balancing figure. Variable Costs is thus $ 3876000 as it's the balancing figure to get to a pretax income of $ 1496000

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