Question

Gordon Manufacturing earned net income of $100,000 during 2015. The company wants to earn net income of $40,000 more during 2016. The company's fixed costs are expected to be $147,000, and variable costs are expected to be 30% of sales. Determine the required sales to meet the target net income during 2016. Required sales Fill in the dollar amounts for the summary income statement for 2016 below, based on your answer to part (a). Sales revenue Variable costs Contribution margin Fixed costs Net income / (Loss)

Answer 1

Answer- Requires sales=Net income+desired net income + fixed cost/ Cm ratio

=$100,000+$40,000+$147,000/ 100-30%

=$287,000/70%

=$410,000

b-

Sales revenue	$410,000
Less:-Variable costs (410,000*30%)	$123,000
Contribution margin	$287,000
Less:-Fixed costs	$147,000
Net Income/(Loss)	$140,000

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