Final answer:
To achieve an $80,000 profit with increased fixed expenses and a 40% contribution margin ratio, Flynn Company needs sales of $570,000.
Step-by-step explanation:
The student's question involves calculating the necessary sales for Flynn Company to achieve a target profit in the context of an increased fixed expense and a known contribution margin ratio. Since the contribution margin ratio is 40%, we know that for each dollar of sales, $0.40 contributes toward covering fixed expenses and profit. Last year's profit was $70,000 with fixed expenses included; since fixed expenses will rise by $10,000 and the profit goal is $80,000, the total amount that needs to be covered by the contribution margin this year is $80,000 (desired profit) + $10,000 (additional fixed expenses) + amount covering last year's fixed expenses.
Last year's fixed expenses can be calculated by subtracting the profit from total contribution margin. The total contribution margin is 40% of $520,000, which equals $208,000. Subtracting last year's profit ($70,000) from this gives us $138,000 fixed expenses for last year. Thus, this year's total to cover is $138,000 + $10,000 + $80,000 = $228,000. To find the required sales, we divide this total by the contribution margin ratio: $228,000 / 0.40 = $570,000.
Therefore, Flynn Company will need $570,000 in sales to meet the target profit of $80,000 with the increased fixed expenses.