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14 October, 07:05

Watson Company has monthly fixed costs of $75,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $14,200, what dollar amount of sales must be made to produce the target income?

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  1. 14 October, 09:31
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    The dollar amount of sales must be made to produce the target income is $223000.

    Explanation:

    required total income = monthly fixed + monthly target income

    = $75,000 + $14,200

    = $89200

    sales = [required total income]/[contribution margin ratio]

    = ($89200) / (40%)

    = $223000

    Therefore, the dollar amount of sales must be made to produce the target income is $223000.
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