Refer to Exercise 3-3. Sales revenue ...........$840,000 Variable expenses........ 630,000 Contribution margin ..... 210,000 Fixed expenses.........112,000 Operating

Question:

Refer to Exercise 3-3.

Sales revenue ...........$840,000

Variable expenses........ 630,000

Contribution margin..... 210,000

Fixed expenses.........112,000

Operating income........ $ 98,000

Required

a. How many cakes will Asher Hyatt have to sell if she wants to earn $148,750 in operating income each month?

b. Assuming a 30% tax rate, how many cakes will Asher Hyatt have to sell if she wants to earn $115,150 in net income each month?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...