The records of Gemini Company show a contribution margin ratio of 40%.The company desires to earn a profit of $35,000 and has fixed costs of $70,000.What sales revenue would have to be generated in order to earn the desired profit?
A) $87,500
B) $262,500
C) $175,000
D) $42,000

Question

Quizplus · Accepted Answer

To find the required sales revenue, we use the formula: Required Sales = (Fixed Costs + Desired Profit) / Contribution Margin Ratio. Plugging in the values: Required Sales = ($70,000 + $35,000) / 0.40 = $105,000 / 0.40 = $262,500.

The Records of Gemini Company Show a Contribution Margin Ratio