A company provided the following data:

How much sales in dollars is necessary to generate a profit of $40,000? (Note: Round contribution margin ratio and sales in dollars to two decimal places.)
A) $528,000.50
B) $513,513.51
C) $214,286.62
D) $100,000.00
E) $150,000.50

Question

A company provided the following data:

How much sales in dollars is necessary to generate a profit of $40,000? (Note: Round contribution margin ratio and sales in dollars to two decimal places.)
A) $528,000.50 
B) $513,513.51 
C) $214,286.62 
D) $100,000.00 
E) $150,000.50

Quizplus · Accepted Answer

Sales dollars necessary to earn a target profit = (Target income + Total fixed cost) / Contribution margin ratio
Contribution margin ratio = Total contribution margin / Sales
Total contribution margin = (Sales - Variable expenses)
Contribution margin ratio = (Sales - Variable expenses) / Sales
Contribution margin ratio = ($600,000 ? $380,000) / ($600,000) = 0.37
Sales dollars necessary to earn a target profit = ($40,000 + $150,000) / 0.37 = $513,513.51
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A Company Provided the Following Data