Rothe Company manufactures and sells a single product that it sells for $80 per

Question

Rothe Company manufactures and sells a single product that it sells for $80 per unit and has a contribution margin ratio of 40%. The company's fixed expenses are $46,400. If Rothe desires a monthly target net operating income equal to 20% of sales, the amount of sales in units will have to be:

Rothe Company manufactures and sells a single product that it sells for $80 per unit and has a contribution margin ratio of 40%. The company's fixed expenses are $46,400. If Rothe desires a monthly target net operating income equal to 20% of sales, the amount of sales in units will have to be:

Explanation / Answer

the formula to solve is:

Where S = the number of units

0.2 X 80S = (.4X 80S) - 46,400

Now simplify to:

16S = 32S - 46,400

Which simplifies further to

46,400 = 16S

Which solves for S as:

2,900 = S

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