Ivan Company Has a Goal of Earning $70,000 After-Tax Income

question 172

Multiple Choice

Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay $20,000 of income taxes at the target level of income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

• A) $23,333.
• B) $36,000.
• C) $300,000.
• D) $353,333.
• E) $420,000.

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Definitions:

Machine-Hours

A measure of the amount of time a machine is operated in the production process, used as a basis for allocating manufacturing overhead.

Markup

The sum added onto the purchase price of merchandise to cover both overhead expenses and profit, ultimately setting the retail price.

Predetermined Overhead Rate

A calculated rate used to assign overhead costs to products or services, based on estimated costs and activity levels.

Machine-Hours

The total time that machines are running in a production process, often used as a basis for allocating manufacturing overhead costs.