Assume the following: (1) Desired target operating income is $20,000, unit price

Question

Assume the following: (1) Desired target operating income is $20,000, unit price for sales is $500, variable costs per unit is $300, and total fixed cost is $10,000; (2) we have applied the formula to calculate the contribution margin method of determining target operating income and have arrived at a numerator amount of $30,000 (20,000 plus 10,000) and a denominator amount of $200 (500 minus 300); (3) these figures yield an answer of 150 units (30,000 divided by 200). What is the required revenue to achieve the target operating income of $20,000?

Explanation / Answer

Required sales in dollars=Required sales in units×Sales price per unit=150 units*$500

=$75000.

Thanks

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