Question

Opal Company manufactures a single product that it sells for $100 per unit and has a contribution margin ratio of 30%. The company's fixed costs are $49,000. If Opal desires a monthly target operating profit equal to 20% of sales, sales will have to be (rounded): (Round intermediate calculations to 2 decimal places)

Answer 1

Answer:

$490,000.

Explanation:

To find out sales of Opal Company we will use below equation,

Sales = Variable cost + Fixed cost + Target profit

variable cost margin will be (1 - contribution margin)

= 0.7 (1 - 0.3)

we will consider sales as x,

x = 0.70x + $49,000 + 0.20x

x = 0.90x + $49,000

x - 0.90x = $49,000

x = $49,000 / 0.10

x = $490,000.

Sales = $490,000.