The formula for target sales is:
A)(Total fixed costs + Target profit)/Contribution margin ratio
B)(Total variable costs + Total fixed costs)/Contribution margin ratio
C)(Total fixed costs + Target profit)/Unit contribution margin
D)(Total variable costs + Total fixed costs)/Unit contribution margin

Question

Quizplus · Accepted Answer

Target sales can be calculated by dividing the sum of total fixed costs and target profit by the contribution margin ratio. Contribution margin is the amount left over from sales revenue after variable costs have been deducted. This formula gives the number of units that need to be sold to break even or achieve the desired profit.

The Formula for Target Sales Is