Question

XYZ Company has a variable cost ratio of 40%, fixed expenses of $200,000, and desires to earn operating income of $100,000. Total sales revenue required to achieve XYZ Company's desired operating income is:

Answer 1

Sales revenue = $500,000

Step-by-step explanation:

Below is the calculation:

Formula for variable cost ratio = Total variable expenses (Total variable cost) / Net Sales = 40%

40% = Total variable cost / Net Sales

Total variable cost = 0.40 Net sales

Operating income = Total revenue - fixed cost - variable cost

100,000 = Total revenue - 200,000 - 0.40 total revenue

300,000 = 0.60 total revenue

Total Revenue = 300,000/ 0.6

Sales revenue = $500,000