The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Sales Dollars,where t is the tax rate,is
A)(Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin.
B)(Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio.
C)(Total Fixed Costs ´ t)/ Unit Contribution Margin.
D)(Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin.

Question

Quizplus · Accepted Answer

The formula for calculating the Target Profit in Sales Dollars using CVP analysis is: 
Target Profit in Sales Dollars = (Total Fixed Costs + Before-Tax Target Profit) / Contribution Margin Ratio.

Option A is incorrect because it does not consider the effect of the tax rate.
Option C is incorrect because it calculates the breakeven point instead of the target profit.
Option D is incorrect because it incorrectly incorporates the tax rate into the formula.

Therefore, the best choice is B.

The Formula Used in Performing Cost-Volume-Profit (CVP)analysis for the Target