To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?
A) (Fixed expenses + Target net profit)/Total contribution margin
B) (Fixed expenses + Target net profit)/Contribution margin ratio
C) Fixed expenses/Contribution margin per unit
D) Target net profit/Contribution margin ratio

Question

Quizplus · Accepted Answer

The formula to obtain the dollar sales volume necessary to attain a given target profit is (Fixed expenses + Target net profit)/Contribution margin ratio. This formula takes into account the fixed expenses, desired net profit, and contribution margin ratio (which represents the percentage of each dollar of sales that contributes to covering fixed expenses and profit).

To Obtain the Dollar Sales Volume Necessary to Attain a Given