If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net...

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000

I know the answer is true but I don't know how/why. Can you please show your calculation? Thank you

Solutions

Expert Solution

Sales revenue required to Earn $70,000
A	Target profit	$ 70,000.00
B	Fixed expenses	$ 290,000.00
C=A+B	Total contribution margin required	$ 360,000.00
D	Contribution margin ratio	30%
E=C/D	Sales revenue required to Earn $70,000	$ 1,200,000.00

What we are doing in here is we are considering required profit equal to Contribution.

Contribution is amount left after variable cost (Sales-Variable cost=Contribution)

Since variable cost is 70% it means Contribution margin is (100-70) 30%

So 30% of contribution is earned on every sales volume. Total contribution required is $360000 that is Total fixed cost +Target profit.

Since $360,000 is equal to 30% we just need to know what would 100% amount be. 100% amount is sales revenue.

Sales revenue to earn $360000= $360000/30 x 100=$1,200,000

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000. Sales are...

At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000 units. a. How much would absorption costing operating income differ between a plan to produce 8,000 units and a plan to produce 10,000 units? b. How much would variable costing operating income differ between the two production plans?

Daily Company’s current fixed costs are $430,000 and current variable cost per unit is $70. The...

Daily Company’s current fixed costs are $430,000 and current variable cost per unit is $70. The current selling price is $92 per unit. a. What is the company's current contribution margin? Round your answer to the nearest cent (2 decimal places). b. What is the company's current contribution margin ratio? Round your answer to 2 decimal places and include a percentage (%) sign. c. What is the company's current break-even point in units? Round your answer to the nearest whole...

Sales price P15 per unit Variable costs: SG&A P2 per unit Production P4 per unit Fixed...

Sales price P15 per unit Variable costs: SG&A P2 per unit Production P4 per unit Fixed costs (total cost incurred for the year): SG&A P14,000 Production P20,000 During the first year, Sherrill Corporation manufactured 5,000 units and sold 3,800. There was no beginning or ending work-in-process inventory. 1. How much income before income taxes would be reported if Stanley uses absorption costing? 2. How much income before income taxes would be reported if variable costing was used? 3. Show why...

Variable Costing—Production Exceeds Sales Fixed manufacturing costs are $37 per unit, and variable manufacturing costs are...

Variable Costing—Production Exceeds Sales Fixed manufacturing costs are $37 per unit, and variable manufacturing costs are $111 per unit. Production was 91,000 units, while sales were 86,450 units. a. Determine whether variable costing income from operations is less than or greater than absorption costing income from operations. b. Determine the difference in variable costing and absorption costing income from operations. $

Variable manufacturing costs are $103 per unit, and fixed manufacturing costs are $162,000. Sales are estimated...

Variable manufacturing costs are $103 per unit, and fixed manufacturing costs are $162,000. Sales are estimated to be 7,500 units. If an amount is zero, enter "0". Do not round interim calculations. Round final answer to nearest whole dollar. a. How much would absorption costing income from operations differ between a plan to produce 7,500 units and a plan to produce 9,000 units? $ b. How much would variable costing income from operations differ between the two production plans? $

Variable manufacturing costs are $108 per unit, and fixed manufacturing costs are $53,200. Sales are estimated...

Variable manufacturing costs are $108 per unit, and fixed manufacturing costs are $53,200. Sales are estimated to be 5,300 units. If an amount is zero, enter "0". Do not round interim calculations. Round final answer to nearest whole dollar. a. How much would absorption costing income from operations differ between a plan to produce 5,300 units and a plan to produce 7,600 units?

Fixed costs are P10 per unit and variable costs are P25 per unit. Production was 13,000...

Fixed costs are P10 per unit and variable costs are P25 per unit. Production was 13,000 units, while sales were 12,000 units. Determine (a) whether variable cost income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption costing income from operations.

AD Company estimates that variable costs will be 70% of sales and fixed costs will total...

AD Company estimates that variable costs will be 70% of sales and fixed costs will total $1,800,000. The selling price of the product is $10, and 700,000 units will be sold. Instructions: Using the mathematical equation (a) Compute the break-even point in units and dollars. (b) Compute the margin of safety in dollars and as a ratio. (c) Compute net income.

Hamood Plumbing Co. estimates that variable costs will be 70% of sales and fixed costs will...

Hamood Plumbing Co. estimates that variable costs will be 70% of sales and fixed costs will total OMR 2,160,000. The selling price of the product is OMR 10, and 750,000 units will be sold. Instructions Using the mathematical equation, (a) Compute the break-even point in units and Omani Riyals. (b) Compute the margin of safety in Riyals and as a ratio. (c) Compute net income. Problem 2 Ibri, Inc. owns a machine that produces baskets for the gift packages the...

Given Sales in units 10,000 Variable manufacturing costs per unit 5 Variable administrative costs per unit...

Given Sales in units 10,000 Variable manufacturing costs per unit 5 Variable administrative costs per unit 2 Fixed manufacturing costs per unit 2 Fixed administrative costs per unit 1 Variable costs 75% of sales Selling price per unit? $2.22 $9.33 $17.50 $20 Given for XM Company the following data for January 20X1. Direct material purchased and used in production accounted for $ 50000 Units purchased 5000 The standard units 4200 Managers estimate price variance not to exceed +1% of the...

Subjects