Business Degree Certification Practice Test 2026 – All-in-One Comprehensive Guide to Exam Success!

To determine the income from operations, we start by calculating the contribution margin, which is the amount remaining from sales after variable costs have been deducted. The contribution margin ratio is given as 30 percent, meaning that 30 percent of sales contributes to covering fixed costs and profit.

First, we calculate the total contribution margin based on sales:

1. Calculate the contribution margin:

Contribution Margin = Sales × Contribution Margin Ratio

Contribution Margin = $920,000 × 0.30

Contribution Margin = $276,000

Next, we find the income from operations by subtracting fixed costs from the total contribution margin:

2. Calculate income from operations:

Income from Operations = Contribution Margin - Fixed Costs

Income from Operations = $276,000 - $160,000

Income from Operations = $116,000

This analysis shows that the income from operations is indeed $116,000, thus confirming the correctness of the conclusion drawn. The other options would not accurately reflect the income from operations given the specified sales, fixed costs, and contribution margin ratio.