Question

Watson Company has monthly fixed costs.. Watson Company has monthly fixed costs of $91,000 and what dollar amount of sales must be made to produce the target income? a 40% contribution margin ratio. If the company has set a target monthly income of a. $15,800, b. $267000 c. $106,800 d. $227500 e. $39.500

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Watson Company has monthly fixed costs of $91,000.

Contribution margin ratio= 0.40

To calculate the dollar amount of sales, we need to use the following formula:

Break-even point (dollars)= (fixed costs + desired profit)/ contribution margin ratio

Break-even point (dollars)= 91,000/0.4= 227,500

A) Desired profit= 15,800

Break-even point (dollars)= (91,000 + 15,800) / 0.40= 267,000

B) Desired profit= 267,000

Break-even point (dollars)= (91,000 + 267,000) / 0.40= 895,000

C) Desired profit= 106,800

Break-even point (dollars)= (91,000 + 106,800) / 0.40= 494,500

D) Desired profit= 227,500

Break-even point (dollars)= (91,000 + 227,500) / 0.40= 796,250