Question

For Sheffield Corp., sales is $3000000, fixed expenses are $900000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $400000

Answer 1

Sales required= $3,611,111.11

Step-by-step explanation:

Giving the following information:

Fixed expenses= $900,000

Contribution margin ratio= 0.36

Desired profit= $400,000

To calculate the sales required, we need to use the break-even point in dollars formula:

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

Break-even point (dollars)= (900,000 + 400,000) / 0.36

Break-even point (dollars)= $3,611,111.11