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?

Question

Quizplus · Accepted Answer

The formula to calculate the required sales to achieve a target income is:

Required Sales = (Fixed Costs + Target Income) / Contribution Margin Ratio

Substituting the values given in the question,

Required Sales = ($36,000 + $70,000) / 0.30

Required Sales = $353,333

Therefore, the best choice is B.

Raven Company Has a Target of Earning $70,000 Pre-Tax Income