5. What are the required sales if ABC Company desires Net Income of $60,000 based on...

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5. What are the required sales if ABC Company desires Net Income of $60,000 based on the information below: Sales Variable Co

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Answer 1

Answer #1

>> Contribution margin = sales - variable cost

>> Contribution margin = $ 60 - $ 15

>> Contribution margin = $ 45.

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>> Contribution margin ratio = ( Contribution margin * 100 ) / Sales

>> Contribution margin ratio = ( $ 45 * 100 ) / $ 60

>> Contribution margin ratio = = 75 %.

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>> Target Sales = ( Fixed cost + Desired profit ) / Contribution margin ratio.

>> Target Sales = ( $ 120,000 + $ 60,000 ) / 75 %

>> Target Sales = $ 240,000.

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Answer 2

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