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30 September, 15:33

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

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  1. 30 September, 16:02
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    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
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