Aspire Appliances desires to earn a target net income of $500,000 for next year. If it has fixed costs of $2,000,000 and variable costs are 60% of sales, what are the required sales?
A) $3,750,000
B) $4,166,667
C) $5,000,000
D) $6,250,000

Question

Quizplus · Accepted Answer

(Fixed Costs + Net Income) / Contribution Margin Ratio = Required sales for desired net income = ($2,000,000 + $500,000)/(1-.60) = $6,250,000

Aspire Appliances Desires to Earn a Target Net Income of $500,000