Question

Raven Company has a target of $70,000 pre-tax income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000? Multiple Choice $23,333. $36,000. $300,000. $353,333. $420,000.

Answer 1

Answer:

$353,333

Explanation:

Given that,

Target pre-tax income = $70,000

Contribution margin ratio = 30%

Fixed cost = $36,000

Contribution required:

= Fixed cost + Earning required

= $36,000 + $70,000

= $106,000

Contribution margin ratio = Contribution margin ÷ Sales

0.3 = $106,000 ÷ Sales

Sales = $106,000 ÷ 0.3

         = $353,333.3 or $353,333