This Year, Mr and Mrs Franklin Paid $93,000 Interest on a Mortgage

question 48

Multiple Choice

This year, Mr and Mrs Franklin paid $93,000 interest on a mortgage incurred in 2008 to build their home in Santa Fe. The average principal balance of the mortgage was $1.43 million. The home has an appraised FMV of only $900,000. Compute the Franklin's itemized deduction for their home mortgage interest.

• A) $65,035
• B) $58,531
• C) $93,000
• D) None of the above

---

Definitions:

Variable Expense Ratio

A metric that compares variable expenses (costs that change with production levels) to total sales, indicating how much revenue is consumed by variable costs.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating the contribution towards covering fixed costs and generating profit.

Contribution Format

An income statement variant that divides expenses into variable and fixed groups, emphasizing the contribution margin.

Break-even Point

The point at which total costs and total revenue are equal, leading to neither profit nor loss.