Meriden Company has a price per unit
In order for Turgo Company to achieve management’s target net income of $62,875, they would need to have sales of $360,500. This can be calculated using the following formula: Fixed Costs + Target Net Income / (1 – Variable Cost %) = Required Sales.
Using this equation we get: 176,700 + 62,875 / (1 – 0.65) = 360,500. Turgo Company needs to reach their net profit goal of $62 875 by generating sales at least of $360 500. These figures assume that variable costs are at 65%, and fixed costs remain static. If either of these variables change then the required sales may vary depending on how much difference there is between management’s original target and their new one.