EM Sales had $2,200,000 in sales last month.The contribution margin ratio was 30% and operating profits were $180,000.What sales volume does EM's need to yield a $240,000 operating profit?
A)$600,000.
B)$2,020,000.
C)$2,400,000.
D)$2,440,000.

Question

Quizplus · Accepted Answer

First, we can use the current information to calculate the total contribution margin for last month:

Contribution margin = Sales * Contribution margin ratio 
CM = $2,200,000 * 0.30 
CM = $660,000

Next, we can use the contribution margin to calculate the current operating profit:

Operating profit = CM - Fixed expenses 
$180,000 = $660,000 - Fixed expenses 
Fixed expenses = $480,000

Now, we can use the contribution margin ratio to calculate the required sales volume to achieve a $240,000 operating profit:

Operating profit = (Sales * Contribution margin ratio) - Fixed expenses 
$240,000 = (Sales * 0.30) - $480,000 
$240,000 + $480,000 = $0.30 * Sales 
$720,000 = $0.30 * Sales 
Sales = $720,000 / 0.30 
Sales = $2,400,000

Therefore, the answer is C) $2,400,000.

EM Sales Had $2,200,000 in Sales Last Month