Assume the company's target profit is $8,000. The dollar sales to attain that target profit is closest to:

Question

Quizplus · Accepted Answer

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

Dollar Sales = (Target Profit + Fixed Costs) / (1 - Variable Cost Ratio)

Using the figures from the question:

Target Profit = $8,000
Fixed Costs = $60,000
Variable Cost Ratio = 0.6
(Variable Costs are 60% of Sales, so Variable Cost Ratio is 0.6)

Plugging in the values:

Dollar Sales = ($8,000 + $60,000) / (1 - 0.6) = $481,333.33

Therefore, the closest answer is C) $481,333.

Assume the Company's Target Profit Is $8,000