Question

If your company has Net Operating Income = $855,000, Total Fixed Cost = $185,000, and Total...

If your company has Net Operating Income = $855,000, Total Fixed Cost = $185,000, and Total Sales Revenue = $1,300,000, what is the sales revenue you need to generate to reach your target profit $2,171,700?

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Answer #1

The question is based on marginal costing

The following are the details provided in the question :-

net operating income - $855000

total fixed cost $185000

total sales revenue- $ 1300000

sales revenue you need to generate to reach your target profit $2,171,700?

solution :-

sales revenue you need to generate to reach your target profit = (total fixed cost + target profit ) divided by pv ratio

= ( $185000 + 2171700 ) / 0.80

= $ 2945875

working note

contribution = (net operating income + total fixed cost ) = $185000 + $ 855000 = 1040000

total sales = $ 1300000

pv ratio = contribution / total sales = $ 1040000/$ 1300000 = 0.8 .

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