Watson Company Has Monthly Fixed Costs of $83,000 and a 40

question 14

Multiple Choice

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

• A) $207,500
• B) $245,000
• C) $37,300
• D) $170,000
• E) $39,200

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Definitions:

Inventory

The goods and materials a business holds for the ultimate goal of resale, production, or utilization.

Labor Hours

The total amount of time workers spend working in a given period, typically measured in hours per day, week, or year.

Isoquant

An isoquant is a curve that represents all the combinations of inputs that produce the same level of output in production theory.

Production Function

A mathematical representation that describes the relationship between inputs and outputs in the production process.