The CEO of RV USA is trying to estimate sales based on a budgeted target profit before taxes of $150,000.If unit contribution margin is $5,000, total sales in June are estimated at $900,000 and fixed costs are $500,000, how many RVs must be sold to attain the target profit before taxes?

Question

Quizplus · Accepted Answer

To achieve the target profit before taxes of $150,000 with a unit contribution margin of $5,000 and fixed costs of $500,000, the formula to use is: Target Profit = (Sales Volume * Unit Contribution Margin) - Fixed Costs. Rearranging to solve for Sales Volume gives: Sales Volume = (Target Profit + Fixed Costs) / Unit Contribution Margin. Plugging in the numbers: (150,000 + 500,000) / 5,000 = 650,000 / 5,000 = 130 RVs.

The CEO of RV USA Is Trying to Estimate Sales