Gordon Manufacturing earned net income of $100,000 during 2015. The company wants to earn net income of $40,000 more during 2016. The company's fixed costs are expected to be $147,000, and variable costs are expected to be 30% of sales.

Required:
Determine the required sales to meet the target net income during 2016.

$267,142.86

Explanation:

The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.

As such, the total sales less the total cost gives the net income.

Let the required sales be $Y

Y - 0.3Y - 147,000 = 40,000

0.7Y = 40,000 + 147,000

Y = 187,000/0.7

= $267,142.86

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