Question

Mr. Jones has a monthly income of $5,600. He wants to identify his monthly variable expenses to see if they are more than 38% of his monthly income. Mr. Jones has fixed expenses totaling $2,912 and his net income is 12% of his monthly income. Determine the total of Mr. Jones's variable expenses and if they are more than 38% of his monthly income.
a.
Mr. Jones's variable expenses total $672 and do not exceed 38% of his monthly income.
b.
Mr. Jones's variable expenses total $2,688 and do exceed 38% of his monthly income.
c.
Mr. Jones's variable expenses total $3,584 and do exceed 38% of his monthly income.
d.
Mr. Jones's variable expenses total $2,016 and do not exceed 38% of his monthly income.


Please select the best answer from the choices provided.

A
B
C
D

Answer 1

D

Net = 12% of 5600 = 0.12(5600) = 672.
Variable expenses = 5600 − fixed(2912) − net(672) = 5600 − 2912 − 672 = 2016.
38% of 5600 = 0.38(5600) = 2128, and 2016 < 2128, so they do not exceed 38%.