The Formula for Calculating the Sales Dollars Required to Meet

question 67

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.

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Definitions:

Fixed Asset

Long-term tangible property or equipment that a firm owns and uses in its operations to generate income, typically not expected to be converted to cash within a year.

Fixed Asset Turnover

A ratio that measures a company's ability to generate sales from its fixed-assets investments such as property, plant, and equipment.

Generating Sales

The process of creating revenue for a business through activities such as marketing, sales calls, and customer service.

Depletion Expense

The allocation of the cost of natural resources over their productive lives, recognizing the reduction in natural resource value as it is extracted and sold.