Question

For Wildhorse Company, variable costs are 68% of sales, and fixed costs are $199,000. Management’s net income goal is $77,800. Compute the required sales in dollars needed to achieve management’s target net income of $77,800. (Use the contribution margin approach.)

Answer 1

Answer: $865000

Explanation:

Contribution margin ratio would be gotten as:

= 100% - 68%

= 32%

= 0.32

Then, the desired sales would be:

= (Fixed cost + desired profit) / CM ratio

= (199,000 + 77800) / 0.32

= 276800 / 0.32

= $865000