Question

Watson Company has monthly fixed costs of $80,000 and a 50% contribution margin ratio. If the company has set a target monthly income of $14,700, what dollar amount of sales must be made to produce the target income

Answer 1

Answer: 189400

Explanation:

The dollar amount of sales that must be made to produce the target income would be:

= (Fixed costs + Target profit) / Contribution margin ratio

= (80000 + 14700) / 50%

= 94700 / 50%

= 94700 / 0.5

= 189,400