The sales needed to earn a target operating income moves managers away from a point of...

 

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The sales needed to earn a target operating income moves managers away from a point of zero profit, toward one of a particular positive profit. Managers find it easy to use actual sales at any point in time to determine how close or far away they are from breakeven. Information: Whittier Company sells mowers at $400 each. Variable cost per unit is $325, and total fixed cost is $45,000. Required: 1. Calculate the contribution margin ratio. 2. Caleulate the sales that Whittier must make to carn an operating income of $37,500. 3. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated. The sales needed to earn a target operating income moves managers away from a point of zero profit, toward one of a particular positive profit. Managers find it easy to use actual sales at any point in time to determine how close or far away they are from breakeven. Information: Whittier Company sells mowers at $400 each. Variable cost per unit is $325, and total fixed cost is $45,000. Required: 1. Calculate the contribution margin ratio. 2. Caleulate the sales that Whittier must make to carn an operating income of $37,500. 3. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated.

Answer rating: 100% (QA)

400 325 Contribution Margin Ratio 01875 400 2 Target IncomeTotal Sales DollarsCosts Contri... View the full answer