Yarn Basket,Ltd.,sells hand-knit scarves.Each scarf sells for $40.The company pays $150 to rent a vending space for one day.The variable costs are $11 per scarf.What total revenue amount does the company need to earn to break even? (Round any percentages to two decimal places and your final answer to the nearest cent.)

Question

Quizplus · Accepted Answer

Required sales in dollars = (Fixed costs + Target profit) / Contribution margin ratio
Contribution margin ratio = Contribution margin / Net sales revenue
Unit contribution margin = $40 - $11 = $29 per scarf
Contribution margin ratio = ($29 / $40) × 100 = 72.50%
Required sales in dollars = ($150 + $0) / 72.50% = $206.90