Narchie sells a single product for $50.Variable costs are 60% of the selling price, and the company has ﬁxed costs that amount to $400,000.Current sales total 16,000 units. In order to produce a target proﬁt of $22,000, Narchie's dollar sales must total:

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit:
Selling price = $50
Variable costs = 60% of selling price = 0.6 * $50 = $30
Contribution margin per unit = selling price - variable costs = $50 - $30 = $20

Next, we can use the contribution margin ratio to determine how much of each dollar of sales contributes to profit:
Contribution margin ratio = contribution margin per unit / selling price = $20 / $50 = 0.4 or 40%

Now we can use the contribution margin ratio to calculate the dollar sales needed to achieve the target profit:
Let x be the dollar sales needed
Contribution margin ratio * x - fixed costs = target profit
0.4x - $400,000 = $22,000
0.4x = $422,000
x = $1,055,000

Therefore, the answer is D) $1,055,000.

Narchie Sells a Single Product for $50