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28 December, 10:15

Raven Company has a target of earning $71,400 pre-tax income. The contribution margin ratio is 32%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $38,800?

a. $289,375.

b. $410,000.

c. $222,813.

d. $343,438.

e. $38,600.

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Answers (1)
  1. 28 December, 14:06
    0
    The amount of dollar sales to be achieved to reach the goal is $343,438

    Explanation:

    We have the following details:

    Fixed Cost = $ 38,600

    Earning Required = $71,300

    Hence Contribution Required = Fixed Cost+Earning Required

    = ($38,600+$71,300)

    = $ 109,900

    We use then the following formula:

    Contribution Margin ratio = Contribution Margin/Sales

    32% = $ 109,900/Sales

    = $ 109,900/32%

    = $343,438. Amount of dollar sales to be achieved to reach the goal
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