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?

Rationale

$130,000 is the forecasted net income for the sale of 14,000 shoes based on the actual results.

To forecast net income, we first calculate the contribution margin per shoe, which is derived from the total contribution margin divided by the number of shoes sold. With the contribution margin of $200,000 and fixed costs of $150,000, we can determine the projected net income for the forecasted sale of 14,000 shoes.

A ($40,000) YOUR ANSWER

This option represents a net income that is significantly lower than what can be calculated from the contribution margin and fixed costs. Given the actual results, the contribution margin covers fixed costs and yields a higher net income than $40,000.

B ($70,000) YOUR ANSWER

While this value is above the fixed costs, it does not reflect the full potential of the contribution margin. The calculation based on the contribution margin indicates a net income well above $70,000 when adjusted for the forecasted sales.

C ($130,000) CORRECT

This is the correct answer. By dividing the contribution margin of $200,000 by the number of shoes sold (which we assume to be 10,000 shoes for the actual results), we determine a contribution margin per shoe of $20. For 14,000 shoes, the total contribution margin would be $280,000. Subtracting fixed costs of $150,000 results in a forecasted net income of $130,000.

D ($230,000) YOUR ANSWER

This forecasted net income is incorrect as it does not account for the fixed costs. While the contribution margin of $200,000 is substantial, the fixed costs must be deducted to arrive at the accurate net income figure, which is significantly lower than $230,000.

Conclusion

The calculation of forecasted net income from sales requires careful analysis of both contribution margin and fixed costs. In this scenario, after evaluating the contribution margin per shoe and adjusting for fixed costs, the projected net income from selling 14,000 shoes is $130,000. This figure underscores the importance of understanding how contribution margins contribute to overall profitability in forecasting scenarios.

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?

$130,000 is the forecasted net income for the sale of 14,000 shoes based on the actual results.

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