Bloom Company management predicts that it will incur fixed costs of $266,000 and earn pretax income of $360,400 in the next period. Its expected contribution margin ratio is 54%. Required: 1. Compute the amount of total dollar sales. 2. Compute the amount of total variable costs.

1. $1,160,000

2. $534,600

Explanation:

1. Computation for the amount of total dollar sales

Using this formula

Total dollar sales=Fixed costs plus pretax income/Contribution margin ratio

Let plug in the formula

Total dollar sales=$626,400/54%

Total dollar sales=$1,160,000

($266,000+$360,400=$626,400)

Therefore the amount of total dollar sales is $1,160,000

2.Computation for the amount of total variable costs.

Sales$1,160,000

Less:

Fixed costs($265,000)

Pretax income($360,400)

Variable costs$534,600

Therefore the amount of total variable costs is $534,600

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