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Raven Company has a target of earning $71,400 pre-tax income. The contribution margin ratio is 32%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $38,800?

a. $289,375.
b. $410,000.
c. $222,813.
d. $343,438.
e. $38,600.

Respuesta :

Answer:

The amount of dollar sales to be achieved to reach the goal is $343,438

Explanation:

We have the following details:

Fixed Cost = $ 38,600

Earning Required = $71,300

Hence Contribution Required= Fixed Cost+Earning Required

                                                   = ($38,600+$71,300)

                                                    = $ 109,900

We use then the following formula:

Contribution Margin ratio = Contribution Margin/Sales

   32%= $ 109,900/Sales

           = $ 109,900/32%

           = $343,438. Amount of dollar sales to be achieved to reach the goal

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