Question

Watson Company has monthly fixed costs of $75,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $14,200, what dollar amount of sales must be made to produce the target income?

Answer 1

Answer:

The dollar amount of sales must be made to produce the target income is $223000.

Explanation:

required total income = monthly fixed + monthly target income

                                    = $75,000 + $14,200

                                    = $89200

sales = [required total income]/[contribution margin ratio]

         = ($89200)/(40%)

         = $223000

Therefore, the dollar amount of sales must be made to produce the target income is $223000.