A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Income (loss) from operations was

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BlackTom AI · Accepted Answer

We need to evaluate the cost behavior and profitability given the sales and cost structure.
First, determine variable costs: they are 70% of sales, and sales are $1,000,000, so variable costs = 0.70 × 1,000,000 = $700,000.
Next, fixed costs are stated as $330,000, and these do not change with the level of output within the relevant range.
Now compute operating income (loss): Sales minus variable costs minus fixed costs = 1,000,000 − 700,000 − 330,000.
Performing the arithmetic: 1,000,000 − 700,000 = 300,000; 300,000 − 330,000 = −30,000.
Therefore, income from operations is a loss of $30,000.
Review the answer choices: $670,000 would imply misallocating costs or misreading variable/fixed splits; $140,000 and $370,000 are not consistent with the given cost structure; $(30,000) matches the calculated loss.
The negative result reflects that fixed costs exceed the contribution margin (sales minus variable costs) at the given sales level, yielding a operating loss rather than a profit.

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Income (loss) from operations was

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