Organizer Company has fixed costs of $200,000 and variable costs are 60% of sales.How much will Organizer Company report as sales when its net income equals $20,000?

Question

Quizplus · Accepted Answer

To find the sales amount when the net income equals $20,000, we can use the formula for profit: Profit = Sales - Variable Costs - Fixed Costs. Given that the variable costs are 60% of sales, we can express variable costs as 0.60 * Sales. The fixed costs are given as $200,000. Setting up the equation with the given net income ($20,000) gives us: $20,000 = Sales - 0.60 * Sales - $200,000. Simplifying, we get $20,000 = 0.40 * Sales - $200,000. Adding $200,000 to both sides and then dividing by 0.40 gives us Sales = $550,000.

Organizer Company Has Fixed Costs of $200,000 and Variable Costs