Question

Raven Company has a target of $70,000 pre-tax income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

Answer 1

Answer:

Sales will be $353333.33

Explanation:

We have given fixed Cost = $ 38,600

Earning Required = $70,000

Contribution margin ratio = 30 %

Hence Contribution Required= Fixed Cost+Earning Required  = $70000+$36000 = $106000

We know that contribution margin ratio is given by

Contribution margin ratio $=\frac{contribution\ margin\ }{sales}$

$0.3=\frac{ 106000 }{sales}$

Sales = $353333.333