Pacific Coast Railway has fixed costs of $70,000 per month. Each passenger generates a $20 variable cost and tickets are sold for $100 each. For the railway to earn an operating income of $180,000 per month, it must generate $312,500 in revenue. This is calculated by determining the contribution margin ratio is 80% and that revenue of $312,500 would cover the $250,000 of fixed costs plus the target operating income.

1. Please help me figure this problem out. thanks
lf Pacfic Coast Railway's fixed costs total $70.000 per month, the variable cost per passenger is
$20, and tickets sel for $100, how much revenue must the Railway generate to earn $180,000 in
operating inoome per month? OA $1,250,000 OB $250,000 *C $312,500 X D. $3,125
Solution
Contribution Margin Ratio = (Sell price - Variable cost)/Sell Price
Contribution Margin Ratio = (100-20)/100
Contribution Margin Ratio = 80%
Fixed Cost = 70000
Target Operating Income = 180000
Required Contribution Margin = Fixed Cost + Target Operating Income
Required Contribution Margin = 70000+180000
Required Contribution Margin = 250000
Revenue must require to generate Operating Income of $180000 = Required Contribution
Margin/Contribution Margin Ratio
Revenue must require to generate Operating Income of $180000 = 250000/80%
Revenue must require to generate Operating Income of $180000 = $ 312500
Answer
$ 312500