Question

Watson company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. if the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income? $207,500 $170,000 $39,200 $245,000 $37,300

Answer 1

The formula is:
Target sales = ( Fixed Costs + Target monthly income ) / Contribution margin ratio
Target sales = ( $83,000 + $15,000 ) / 0.4 =
= $98,000 / 0.4 = $245,000
Answer:
D ) $245,000 must be made to produce the target income.