Question

Sunn Company has fixed costs of ( $ 32,000 ). What is the amount of sales required to achieve a target operating income of ( $ 10,000 )?

a. ( $ 164,000 )
b. ( $ 212,000 )
c. ( $ 222,000 )
d. ( $ 232,000 )

Answer 1

Without the variable cost per unit and the selling price, it is impossible to calculate the required sales for Sunn Company to achieve a target operating income of $10,000.

Step-by-step explanation:

To determine the amount of sales required to achieve a target operating income for Sunn Company, which has fixed costs of $32,000, you would typically use the contribution margin approach. However, the information provided in the scenario does not include the variable cost per unit or the selling price per unit, which are essential to calculate the contribution margin and then find the required sales level. Normally, the formula to calculate the needed sales to hit a target operating income is:

Required Sales = (Fixed Costs + Target Operating Income) / Contribution Margin Ratio

Without the selling price or variable costs per unit, we cannot accurately derive the contribution margin ratio or provide a specific sales figure required to reach a target operating income of $10,000 for Sunn Company.