Question

The contribution margin $25 per unit and contribution margin at break-even point is $200,000. To obtain a target net operating income of $60,000, sales in units would have to be? When the contribution margin ratio is 25% and contribution margin at break-even point is $200,000. What is total sales revenue at a target net operating income of $60,000?  

Answer 1

Ans-a- Calculation of units to obtain a target net operating income of $60,000:-

Units to obtain a target profit= Target profit + Fixed expenses/ Contribution margin per unit

=$60,000+$200,000/ $25

=10,400 units

b- Calculation of total sales revenue at a target net operating income of $60,000:-

Dollar sales to attain a target net operating income = Target profit+ Fixed expenses/ Contribution margin ratio

=$60,000+$200,000/ 0.25

=$1,040,000

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