Answer:
1. $2,892,000
2. 21.58%
Step-by-step explanation:
1. Calculation to determine What amount of sales (in dollars) is needed to produce this target income
First step is to calculate the Contribution margin ratio
Contribution margin ratio =$784,000 /$ 3,136,000 Contribution margin ratio= 25%
Now let calculate the Required sales using this formula
Required sales = (Fixed cost+Target income)/Contribution margin ratio
Let plug in the formula
Required sales= ($567,000 +$156,000)/0.25 =
Required sales=$723,000/0.25
Required sales=$2,892,000
Therefore the amount of sales (in dollars) needed to produce this target income will be $2,892,000
2. Calculation to determine margin of safety (in percent)
First step is to calculate the Break even sales
Break even sales = ($567,000/0.25)
Break even sales= $2,268,000
Now let calculate Margin of safety (%
Margin of safety (%) =$2,892,000- $2,268,000)/$2,892,000
Margin of safety (%)=$624,000/$2,892,000
Margin of safety (%)=0.2158
Margin of safety (%)=21.58%
Therefore margin of safety (in percent) will be 21.58%