Question

Carnelian Company sells bicycles at $200 each. Variable cost per unit is $160, and total fixed cost is $120,600. Calculate the sales that Carnelian must make to earn an operating income of $21,500. a. $238,833.

b. $716,500.
c. $243,800.
d. $626,000.

Answer 1

Carnelian Company must make $142,260 in sales to earn an operating income of $21,500.

Step-by-step explanation:

To calculate the sales that Carnelian Company must make to earn an operating income of $21,500, we need to set up an equation using the profit equation:

Profit = (Sales revenue - Variable costs) - Fixed costs

Substituting the given values:

$21,500 = (Sales revenue - $160) - $120,600

Now, rearranging the equation to solve for Sales revenue:

Sales revenue = $21,500 + $160 + $120,600

Sales revenue = $142,260

Therefore, Carnelian Company must make $142,260 in sales to earn an operating income of $21,500.

Answer 2

Carnelian Company

The sales that Carnelian must make to earn an operating income of $21,500 is:

= $710,500.

Step-by-step explanation:

a) Data and Calculations:

Selling price per bicycle = $200

Variable cost per unit = $160

Contribution margin per unit = $40 ($200 - $160)

Contribution margin percentage = $40/$200 * 100 = 20%

Fixed cost = $120,600

Target operating income = $21,500

Sales in dollars to earn target operating income = (Fixed cost + Target Income)/Contribution margin ratio

= $120,600 + $21,500/20%

= $142,100/0.2

= $710,500