Question

Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss’ target net income?

Answer 1

At Moss’ target net income the sales revenue will be $227, 500

Solution:

Sales revenue required to attain target net income of $35,000 will be as follows,

$\Rightarrow$ Fixed Cost of  $56,000 + target net income of $35,000 / Contribution margin ratio of 40% = $227, 500

$227, 500 - Most must generate sales of $227,500 to earn a net income of $35,000