For Vaughn Manufacturing, sales is $2500000, fixed expenses are $900000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $500000

$3,555,555

Explanation:

For Vaughn Manufacturing, sales is $2500000, fixed expenses are $900000, and the contribution margin ratio is 36%.

The required sales in dollars to earn a target net income of $500000 will be derived from the formula

1. Sales less variable cost = Contribution

2. Contribution less Fixed Costs = Net Profit or Contribution = Net Profit + Fixed Costs = 500,000 + 900,000 = $1,100,000.

Using the formula in percentages. Since Contribution is 36%, Variable costs will be 100% - 36% = 64%.

Contribution in (2) above is 1,100,000 which is 36%,

Therefore 1% = 1,100,000 / 36 = $30,555.55,

Variable costs = 30,555.55 x 64% = $1,955,555.

Sales is 100% = 30,555.55 x 100 = $3,555,555

answer; the above statement is (true);