The contribution margin ratio of Mountain Corporation's only product is 52%. The company's monthly fixed expense is $296,400 and the company's monthly target profit is $7,000. The dollar sales to attain that target profit is closest to:

Question

Quizplus · Accepted Answer

We can use the formula:
(Dollar sales - variable expenses) / dollar sales = contribution margin ratio
or rearranging
Dollar sales = (Fixed expenses + Target profit) / contribution margin ratio

Substituting the given values, we have:
Dollar sales = ($296,400 + $7,000) / 0.52
Dollar sales = $583,461.54

Rounding this value to the nearest dollar gives us the closest answer of $583,462, which is option C.

The Contribution Margin Ratio of Mountain Corporation's Only Product Is