Journey Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.50; and total fixed costs of $81,250. Determine the dollar sales needed to generate a pre-tax income of $44,000, rounded to the nearest whole dollar.
What will be an ideal response?
Contribution margin ratio = ($18 — $8.50)/$18 = 52.8%
Targeted dollar sales = ($81,250 + $44,000)/0.528 = $237,216
Or, alternatively:
Contribution margin per unit = $18 — $8.50=$9.50
Targeted sales in units= ($81,250 + $44,000)/$9.50=13,184 units rounded to nearest whole unit.
Targeted dollar sales = 13,184 units * $18 =$237,312
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