Sales Units and Dollars 4. What is the level of sales dollars needed for Legrand

Question

Sales Units and Dollars 4. What is the level of sales dollars needed for Legrand to earn operating income of 10% of sales? Shaded cells have feedback. X or 51/5 $620,976 X 440.00 080.00 60.00 40.00 20.00 Points: 0/1 Feedback ? Check My Work Operating income Sales -(Variable cost ratio x Sales) - Fixed cost Replace Operating income with 10% of Sales in the equation. Alternatively, add 10% of Sales to fixed costs and 25% of Sales (contribution margin) and solve for sales. Review the "How to Calculate Sales Needed to Earn a Target

Explanation / Answer

Solution:

Total Sales Revenue = $277,440

Desired Operating Income = 10% of Sales $277,440 = $27,744

Contribution Margin Ratio = 25%

Level of Sales dollars needed to earn operating income of 10% of sales = (Total Fixed Cost + Desired Income) / Contribution margin ratio

= ($58,140 + 27,744) / 25%

= $85,884 / 25% or 0.25

= $343,536

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