Winter Wonderland sells hand-knit scarves.Each scarf sells for $50.The company pays $30 to rent a vending space for one day.The variable costs are $10 per scarf.What total revenue amount does the company need to earn to break even? (Round any percentages to two decimal places and your final answer to the nearest cent. )

Question

Quizplus · Accepted Answer

B)Required sales in dollars = (Fixed costs + Target profit)/ Contribution margin ratio
Contribution margin ratio = Contribution margin / Net sales revenue
Unit contribution margin = $50 - $10 = $40 per scarf
Contribution margin ratio = ($40 / $50)× 100 = 80.00%
Required sales in dollars = ($30 + $0)/ 80.00% = $37.50

Winter Wonderland Sells Hand-Knit Scarves