Question

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

Answer 1

Answer:

$245,000.00

Explanation:

The amount of sales revenue to be made to achieve target profit is computed as follows:

Sales revenue to achieve target income

= Total fixed cost for the period + target profit/ contribution margin

Contribution margin = (Sales - variable cost) / sales   ×  100

The figure has been given as 40% in the question

Sales revenue to achieve target profit = (83,000 + 15,000)/0.4

$245,000.00

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

Sales revenue to achieve target profit = $245,000.00