Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20, variable cost is $8 and fixed costs total $40,000, what must her sales revenue be in order to reach her goal?

Question

Quizplus · Accepted Answer

Operating income is calculated by subtracting total costs (variable costs + fixed costs) from sales revenue. Let's solve for the sales revenue using the given information:

Operating income = $20,000
Selling price = $20
Variable cost = $8
Fixed cost = $40,000

Sales revenue = (Operating income + Total costs) / Selling price
Sales revenue = ($20,000 + ($8Q + $40,000)) / $20, where Q is the quantity sold

Simplifying the equation, we get:

Sales revenue = $2,000 + $0.4Q

Now, let's substitute $20,000 for operating income and solve for Q:

$20,000 = $2,000 + $0.4Q
$0.4Q = $18,000
Q = 45,000 units

Finally, let's calculate the sales revenue using the quantity sold:

Sales revenue = Selling price x Quantity sold
Sales revenue = $20 x 45,000
Sales revenue = $900,000

Therefore, the answer is C) $100,000.

Barbara's Boutique Wants to Know What It Takes to Have