Raven Company has a target of $70,000 pre-tax income.The contribution margin ratio is 30%.What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?
A)$23,333.
B)$36,000.
C)$300,000.
D)$353,333.
E)$420,000.

Question

Quizplus · Accepted Answer

Contribution margin (CM) = Sales - Variable costs 
CM ratio = CM/Sales

We can use the formula method to find the dollar sales needed:

$70,000 + $36,000 = (Sales * 30%) 
$106,000 = 0.3(Sales) 
$353,333 = Sales

Raven Company Has a Target of $70,000 Pre-Tax Income