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For Sheffield Corp., sales is $3000000, fixed expenses are $900000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $400000

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Answer:

Sales required= $3,611,111.11

Explanation:

Giving the following information:

Fixed expenses= $900,000

Contribution margin ratio= 0.36

Desired profit= $400,000

To calculate the sales required, we need to use the break-even point in dollars formula:

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

Break-even point (dollars)= (900,000 + 400,000) / 0.36

Break-even point (dollars)= $3,611,111.11

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