Rothe Company manufactures and sells a single product that it sells for £90 per unit and has a contribution margin ratio of 35%. The company's fixed expenses are £46,800. If Rothe desires a monthly target net operating income equal to 15% of sales, sales will have to be (rounded)

Question

Quizplus · Accepted Answer

To find the sales needed to achieve a target net operating income of 15% of sales, we first calculate the required sales using the formula: Sales = Fixed Expenses / (Contribution Margin Ratio - Target Net Income Ratio). Here, Sales = £46,800 / (0.35 - 0.15) = £234,000. Dividing this by the selling price per unit (£90), we get 2,600 units.

Rothe Company Manufactures and Sells a Single Product That It