Question

If the contribution margin ratio is 45%, target operating income is $50,000, and the sales revenue needed to achieve the target operating income is $300,000, what are total fixed expenses

Answer 1

$85,000= fixed costs

Step-by-step explanation:

Giving the following information:

Contribution margin ratio= 0.45

Desired profit= $50,000

Break-even point in sales with desired income= $300,000

To calculate the fixed costs, we need to use the following formula:

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

300,000 = (fixed costs + 50,000) / 0.45

135,000 - 50,000 = fixed costs

$85,000= fixed costs