|Posted: 20 Jun 2012 at 12:16 | IP Logged
Let’s work with this formula.
Sales = VC (Variable Costs) + NI (Net Income) + FC (Fixed Costs)
The problem gives us this info:
VC = 60% of Sales
NI = 15% Sales
FC = 20,000
So now we plug in the values into the formula and solve for x.
Sales = .60(Sales) + .15(Sales) + $20,000
We will go ahead and simplify the formula by adding the VC and NI so now it looks like this.
Sales = .75(Sales) + $20,000
We’ll further simplify the formula by subtracting 75% of sales from both sides. Since Sales on the left hand of the formula is at 100% and we subtract 75%, then we’re left with 25% of sales. The formula now looks like this.
.25Sales = $20,000
Here we can divide both sides by .25 so we get this
Sales = 20000/.25 = $80,000
As a final step, we can check this number by plugin this into the formula.
VC = 60% of Sales = .60(80,000) = $48,000
NI = 15% of Sales = .15(80,000) = $12,000
FC = $20,000
So does Sales of 80,000 = VC of $48,000 + NI of $12,000 + FC of $20,000? Yes it does!
So the answer is C. $80,000.