Fern,Inc.has fixed costs of $400,000 and a contribution margin ratio of 30%.How much sales revenue must be earned for a profit of $80,000?
A)$144,000
B)$336,000
C)$1,600,000
D)$1,920,000

Question

Quizplus · Accepted Answer

The formula for calculating the break-even point is:

Break-even point = Fixed costs / Contribution margin ratio

Substituting the given values, we get:

Break-even point = $400,000 / 30% = $1,333,333

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

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

Substituting the given values and rearranging the formula, we get:

Sales revenue = (Profit + Fixed costs) / Contribution margin ratio
Sales revenue = ($80,000 + $400,000) / 30%
Sales revenue = $1,600,000

Therefore, the answer is C.

Fern,IncHas Fixed Costs of $400,000 and a Contribution Margin Ratio