The Formula for Calculating the Sales Dollars Required to Meet

question 53

Multiple Choice

The formula for calculating the sales dollars required to meet target operating income is

• A)Total fixed costs plus target operating income divided by contribution margin per unit.
• B)Total fixed costs plus target operating income divided by contribution margin ratio.
• C)Total fixed costs plus target operating income divided by total variable costs.
• D)Contribution margin plus target operating income divided by total fixed costs.

---

Definitions:

Cash Receipt

The collection of money (paper money, coins, checks) received by a business for the sale of goods or services or any other financial transaction.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.

Recorded When Earned

A principle indicating that revenue should be recognized in the accounting period in which it is earned, regardless of when the cash is received.

Accrued Revenues

Revenues that have been earned by providing goods or services but have not yet been received or recorded.