Last year, Pamela Company reported a profit of $70,000 when sales totaled $520,000 and the contribution margin ratio was 35%.
If fixed expenses increase by $20,000 next year, what will sales have to be for the company to earn a profit of $80,000?

Question

Quizplus · Accepted Answer

Contribution Margin ($520,000 x 35%) - $70,000 (profit) = $112,000 Fixed exp.
New Fixed exp: $112,000 + $20,000 = $132,000
Desired Profit: X = $80,000 + $132,000 + 0.65X
0.35X = $212,000
X = 605,714

Last Year, Pamela Company Reported a Profit of $70,000 When