In 2018, Samantha's Bath and Body Shop had variable costs of $27,000, fixed costs of $18,000, and a net loss of $4,500.
The annual sales volume required for Samantha's to have a before-tax income of $18,000 is

Question

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To find the required sales volume, we use the formula: Sales = Fixed Costs + Desired Profit + Loss / Contribution Margin Ratio. The contribution margin ratio is 1 - (Variable Costs/Sales). Given the loss, we first find the break-even sales: $18,000 + $4,500 = $22,500. Then, calculate the sales needed for a $18,000 profit: $18,000 + $22,500 = $40,500. The contribution margin ratio is 1 - ($27,000/$126,000) = 0.7857. Thus, required sales = $40,500 / 0.7857 = $126,000.

In 2018, Samantha's Bath and Body Shop Had Variable Costs