Assume the company's target profit is $15,000. The dollar sales to attain that target profit is closest to:

Question

Quizplus · Accepted Answer

The formula to calculate the dollar sales to attain a target profit is:

Dollar Sales = (Target Profit + Total Fixed Costs) / Contribution Margin Ratio

We are given the target profit as $15,000.

The total fixed costs are $95,000.

The contribution margin ratio can be calculated as follows:

Contribution Margin Ratio = (Total Revenue - Total Variable Costs) / Total Revenue

We are given the following information:

Selling Price per unit = $35
Variable Cost per unit = $21

Contribution Margin Ratio = (35 - 21) / 35 = 0.4 or 40%

Using the formula above:

Dollar Sales = (15,000 + 95,000) / 0.4 = $537,739

Therefore, the closest answer choice is B.

Assume the Company's Target Profit Is $15,000