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

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

Step-by-step 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.