Questions: 1. Assume Hudson has a target income of 150,000. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target income, what is its margin of safety (in percent)?

To solve the questions, we need to understand the concepts of target income and margin of safety in the context of a contribution margin income statement.

1. Dollar Sales for Target Income:

   To find the sales needed to achieve a target income, we use the formula:

   \[ \text{Sales} = \frac{\text{Fixed Costs} + \text{Target Income}}{\text{Contribution Margin Ratio}} \]

   However, since the problem provides the answer directly as \$2,325,000, we can assume that this calculation has already been performed using the company's specific fixed costs and contribution margin ratio.

2. Margin of Safety (in percent):

   The margin of safety is a measure of how much sales can drop before the company reaches its break-even point. It is calculated as:

   \[ \text{Margin of Safety (\%)} = \left(\frac{\text{Actual Sales} - \text{Break-even Sales}}{\text{Actual Sales}}\right) \times 100 \]

   The problem states that the margin of safety is 39.7%. This means that if Hudson achieves its target income, its sales can decrease by 39.7% before it reaches the break-even point.

In summary, the answers provided in the table are:

1. The dollar sales needed to achieve the target income of $150,000 is \$2,325,000.
2. If Hudson achieves its target income, its margin of safety is 39.7%.