Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of $81,900 by using the point in sales equation

=$246,000

Explanation:

Intended sales 3500 units

Selling price =$60

variable costs 35% of sales price is 35/100 x 60= $21

Contribution margin is 65% of sales price = 65/100 x 60 = $39

Fixed costs =$78,000

Sales revenue to make $81,900 will be

operating income = total contribution margin -Fixed costs

$81,900 = TCM - $78,000

TCM = $81,900 +78,000

TCM= 159,900

TCM is a product of contribution margins and sales units

159,900 =$39 x sales units

sales units = 159,000/ $39

sales units = 4,100

sales revenue = sales units x selling price

=$60 X 4100

=$246,000

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