Question

Raven Company has a target of earning $71,200 pre-tax income. The contribution margin ratio is 16%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $38,400

Answer 1

Answer:

$685,000  

Explanation:

First and foremost, the formula for determining the contribution margin ratio can be used to determine the target dollars sales as shown below:

contribution margin ratio=contibution margin/sales revenue

contribution margin ratio=16%

contribution margin required=pretax income+fixed costs

contribution margin required=$71,200+$38,400=$109,600  

16%=$109,600/sales revenue

16%*sales revenue=$109,600

sales revenue=$109,600/16%

sales revenue=$685,000