The contribution margin ratio is 25% for Grain Company and the break-even point in sales is £200,000. If Grain Company's target net operating income is £60,000, sales would have to be
A)£260,000.
B)£440,000.
C)£280,000.
D)£240,000.

Question

Quizplus · Accepted Answer

To achieve a target net operating income of £60,000 with a contribution margin ratio of 25%, the required sales can be calculated as follows: Break-even sales + (Target net operating income / Contribution margin ratio) = £200,000 + (£60,000 / 0.25) = £200,000 + £240,000 = £440,000.

The Contribution Margin Ratio Is 25% for Grain Company and the Break-Even