The addition of a specified target operating income to contribution margin analysis has the same effect on required sales in units as increasing fixed expenses.

Question

Quizplus · Accepted Answer

Both adding a specified target operating income and increasing fixed expenses will increase the required sales in units to achieve the desired level of profit. This is because the target operating income represents a fixed profit goal that must be earned on top of covering variable and fixed costs, similar to increasing fixed expenses.

The Addition of a Specified Target Operating Income to Contribution