An operation operates with a variable cost percentage of 72%. The owner wants to increase sales revenue by an amount necessary to provide for an additional operating income of $800 a month, or $9,600 a year. What is the additional increase in sales revenue required

The answer is $2,857.14

Explanation:

Let us assume Sales be $500 per month

Monthly

Sales $500

Less: Variable Cost (72%) $360

Contribution (will be 28%) $140

Less: Fixed Cost (Assume) 0

Operating Income $140

If there should be an increase of $800 per month in the operating Income

Revised Operating Income $140 + $800 = $940

Therefore Contribution is equal to $ 940

If Contribution is $940 equal to 28%, then Sales be 100%

$940 : 28%

$3,357.14

Therefore additional increase in Sales revenue required per month

$3,357.14 - $500

$2,857.14