The required sales in dollars needed to achieve managements target is $607,5000.
Net income is total revenue less total cost. Total cost is the sum of fixed cost and variable cost. Fixed cost is the cost that remains constant regardless of the level of output. e.g. rent. Variable cost is the cost that varies with output e.g. wages.
Net income = sales - total cost
Net income = sales - (fixed cost + variable cost)
$67,500 = sales - ($175,500 + 0.6sales)
$67,500 = sales - $175,500 - 0.6sales
$67,500 + $175,500 = sales - 0.6sales
243,000 = 0.4sales
sales = 243,000 / 0.4
sales = $607,500
Here is the complete question:
For Pharaoh Company, variable costs are 60% of sales, the fixed costs are $175,500. Managements net income goal is $67,500.Compute the required sales in dollars needed to achieve managements target net income of $67.500.
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