Raven Company has a target of earning $70,000 pre-tax income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

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9 March, 12:16

Raven Company has a target of earning $70,000 pre-tax income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

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Quentin Dougherty · Answer 1

Target dollar sales = $353,333

Explanation:

First we need to find out how much contribution do we need to get a profit of 70,000.

Profit = Contribution - Fixed cost.

70,000=Contribution-36,000

70,000+36,000=106,000

Contribution = 106,000

Now in order to find the sales we will use the formula

Target Sales = Contribution/Contribution margin

Contribution = 106,000

Contribution margin = 30%=0.3

Input the values into the formula

106,000/0.3=353,333.333