How much sales are required to earn a target net income of $128,000 if total fixed costs are $160,000 and the contribution margin ratio is 40%?
A) $400,000
B) $648,000
C) $720,000
D) $320,000

Question

Quizplus · Accepted Answer

The formula for calculating the sales required to earn a target net income is:

Sales = (Total fixed costs + Target net income) / Contribution margin ratio

Plugging in the given values:

Sales = ($160,000 + $128,000) / 0.4
Sales = $288,000 / 0.4
Sales = $720,000

Therefore, the required sales to earn a target net income of $128,000 with total fixed costs of $160,000 and a contribution margin ratio of 40% is $720,000. Option C is the correct answer.

How Much Sales Are Required to Earn a Target Net