Question

Dorian company produces and sells a single product. the product sells for $60 per unit and has a contribution margin ratio of 40%. the company's monthly fixed expenses are $28,800. of dorian company desires a monthly net operating income equal to 10% of sales, monthly sales will have to be:

Answer 1

Contribution margin ratio is 40% or $24 per unit Fixed expenses are $28,800 Variable expense per unit is $36 Assuming Q is quantity, sales needed to achieve monthly net equal to 10% of sales is Sales = Variable expenses + Fixed expenses + profit $60Q = $36Q + $28,800 + ($60Q x 10%) $18Q = $28,800 Q = 1600 units Monthly sales will have to be 1600 x $60 = $96,000