6 Fixed costs Variable costs as a % of sales Desired net income 200,000 20% 500,000 Compute: Break even in $$ Required...

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6 Fixed costs Variable costs as a % of sales Desired net income 200,000 20% 500,000 Compute: Break even in $$ Required sales

business accounting

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Answer 1

Answer #1

Solution 6:

CM ratio = 100% - Variable cost ratio = 100% - 20% = 80%

Break even in $ = Fixed costs / CM ratio = $200,000 / 80% = $250,000

Required sales to earn desired net income = (Fixed costs + Target income) / CM ratio = ($200,000 + $500,000) / 80% = $875,000

Solution 7:

CM ratio = 100% - Variable cost ratio = 100% - 20% = 80%

Break even in $ = Fixed costs / CM ratio = $300,000 / 80% = $375,000

Current sales = (Current net income + Fixed costs) /CM ratio = ($500,000 + $300,000) / 80% = $1,000,000

Required sales to earn desired net income = (Fixed costs + Target income) / CM ratio = ($300,000 + $1,000,000) / 80% = $1,625,000

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