Question

Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $192 per unit. The company's annual fixed costs are $734,400. Management targets an annual pretax income of $1,200,000. Assume that fixed costs remain at $734,400. Answer is complete but not entirely correct. (1) Compute the unit sales to earn the target income. Units to Achieve Target Choose Denominator: Choose Numerator: Contribution margin per Units to achieve target Fixed costs plus pretax income = unit 40,300 units 1,934,400 48 = $ (2) Compute the dollar sales to earn the target income. Dollars to Achieve Target Choose Numerator: Choose Denominator: Fixed costs plus pretax income Contribution margin ratio Dollars to achieve target $ $ 773,760,000 1,934,400 / 0%

Answer 1

(2) Compute the dollar sales to earn the target income.

Choose Numerator:	/	Choose Denominator:	=	Dollars to achieve target
Fixed costs plus pretax income	/	Contribution margin ratio	=	Dollars to achieve target
$1,934,400	/	20%	=	$9,672,000

Contribution margin ratio = Contribution margin / Selling price = $48 / $240 = 0.20 or 20%