During a recent fiscal year, Creek Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:
A) $1,100,000.
B) $1,200,000.
C) $500,000.
D) $1,600,000.
E) $2,100,000.
B) $1,200,000.
Explanation: $400,000 of Contribution Margin/.25 CM Ratio = Sales
$1,600,000 = Sales
Sales - Variable Costs = Contribution Margin
$1,600,000 - VC = $400,000
$1,200,000 = VC
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