If variable costs per unit are 70% of sales fixed costs are $290000 and target net income is $70000 required sales are $1200000.

Question

Quizplus · Accepted Answer

We can use the contribution margin ratio formula to solve for the required sales:
Contribution Margin Ratio = (Sales - Variable Costs) / Sales
We know that variable costs per unit are 70% of sales, so the contribution margin ratio is 0.3 (1 - 0.7). We also know that the company has a target net income of $70,000 and fixed costs of $290,000. Using the formula for target net income, we can set up the equation:
Target Net Income = (Sales - Variable Costs - Fixed Costs)
$70,000 = (S - 0.7S - $290,000)
$360,000 = 0.3S
S = $1,200,000
Therefore, the required sales to achieve the target net income are $1,200,000, which matches the given information.

If Variable Costs Per Unit Are 70% of Sales Fixed