Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?
A) $375,000.
B) $451,000.
C) $431,000.
D) $400,000.Sales = 60,000/(.25 - .10)= $400,000

Question

Quizplus · Accepted Answer

We need to use the formula: 
Operating Income = (Sales - Variable Expenses) - Fixed Expenses 
We are given:
Sales = $200,000 
Variable Expenses = $150,000 
Fixed Expenses = $60,000 
Net Loss = $10,000

We need to find the sales needed to achieve an operating income of 10% of sales. Let's call this sales x:

0.10x = Operating Income 
= (x - $150,000) - $60,000

Solving for x:

0.10x + $150,000 = x - $60,000 
$210,000 = 0.90x 
x = $233,333.33

Therefore, the answer is D) $400,000. Sales = 60,000/(.25 - .10)= $400,000

Koby CoHas Sales of $200,000 with Variable Expenses of $150,000,fixed Expenses