Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay $20,000 of income taxes at the target level of 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

To find the required sales, first calculate the total income needed before taxes: $70,000 (after-tax income) + $20,000 (taxes) = $90,000. Then, add fixed costs: $90,000 + $36,000 = $126,000. Finally, divide by the contribution margin ratio: $126,000 / 0.30 = $420,000.

Ivan Company Has a Goal of Earning $70,000 After-Tax Income