Martol,Inc.has fixed costs of $200,000 and a contribution margin ratio of 40%.How much sales revenue must be earned for a profit of $80,000?
A)$140,000
B)$560,000
C)$700,000
D)$1,120,000

Question

Quizplus · Accepted Answer

To find the sales revenue needed for a profit of $80,000, we can use the following formula:

Profit = (Sales revenue x Contribution margin ratio) - Fixed costs

$80,000 = (Sales revenue x 0.4) - $200,000

$80,000 + $200,000 = 0.4(Sales revenue)

$280,000 = 0.4(Sales revenue)

Sales revenue = $700,000

Therefore, the best choice is C, $700,000.