Jagswear Inc. earned operating income of $92,000 during 2020. The company wants to earn operating income of $157,000 during 2020. Its fixed costs are expected to be $59,300, and variable costs are expected to be 25% of sales.
Determine the required sales to meet the target operating income during 2020.
Required sales |
$enter the Required sales in dollars |
Fill in the dollar amounts for the summary income statement for
2020 below based on your answer to part a.
Sales revenue | $enter a dollar amount | ||||
---|---|---|---|---|---|
Variable costs | enter a dollar amount | ||||
Contribution margin | enter a subtotal of the two previous amounts | ||||
Fixed costs | enter a dollar amount | ||||
Operating income | $enter a total amount |
Answer-
JAGSWEAR INC. | ||
INCOME STATEMENT 2020 | ||
PARTICULARS | AMOUNT | |
$ | ||
Sales | 288400 | |
Less- Variable costs | $288400*25% | 72100 |
Contribution margin | 216300 | |
Less- Fixed costs | 59300 | |
Net operating income | 157000 |
Explanation- Net Operating income = Contribution margin – Fixed costs
$157000 = Contribution margin - $59300
Contribution margin = $157000 + $59300
= $216300
Variable cost ratio = 25% of sales
Contribution margin ratio = 1.00 – 0.25
= 0.75 or 75%
Sales = Contribution margin/ Contribution margin ratio
= $216300/75%
= $288400
Jagswear Inc. earned operating income of $92,000 during 2020. The company wants to earn operating income...
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