(c) The company has a target net income of $216000. What is the required sales in dollars for the company to meet its target?
= (Fixed Costs + Target Profit ) / Contribution Ratio
= ($482400 + $216000 ) / 0.25
= $27,93,600
“Sales dollars required for target net income = $27,93,600 “
Workings
Sales = $16,00,000
Variable cost =$514000+$270400+($240000*0.40)+ ($282000*0.20)+ ($376000*0.70) = $12,00,000
Fixed Costs = $4,82,400
Contribution per unit = ($16,00,000 - $12,00,000 ) / 1,00,000 units
= $4 per unit
Selling price = $16 per unit
Contribution Ratio = $4/$16 = 25%
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