5. The Herald Company manufactures and sells a single product which sells for $50 per unit and has a contribution margin ratio of 30%. The company's monthly fixed expenses are $25,000. If Herald desires a monthly target net operating income equal to 20% of sales dollars, sales in units will have to be (rounded): A. 2,500 units B. 5,000 units C. 1,666 units D. 1,000 units
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Since it's 20% of sales dollars, we can express it as 0.20 * Sales. Second, we know that the contribution margin ratio is 30%, or 0.30. This means that for each dollar of sales, 30 cents contribute to covering fixed costs and then to profits. Third, we know that Show more…
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