Asked by Laura Derhamer on Jun 03, 2024
Verified
The contribution margin ratio of Mountain Corporation's only product is 52%.The company's monthly fixed expense is $296,400 and the company's monthly target profit is $7,000.The dollar sales to attain that target profit is closest to:
A) $570,000
B) $157,768
C) $583,462
D) $154,128
Target Profit
The desired financial gain a company aims to achieve within a specific period through its operations and sales.
Fixed Expense
Charges that stay unchanged with shifts in the amount of products made or the number of sales.
- Figure out the sales quantity required to meet a specific profit objective.
Verified Answer
JZ
Jessica ZaragozaJun 06, 2024
Final Answer :
C
Explanation :
To calculate the dollar sales to attain the target profit, we can use the following formula:
Dollar sales = (Fixed expenses + Target profit) / Contribution margin ratio
Plugging in the given values, we get:
Dollar sales = ($296,400 + $7,000) / 0.52
Dollar sales = $303,400 / 0.52
Dollar sales = $583,462 (rounded to the nearest dollar)
Therefore, the closest answer is C) $583,462.
Dollar sales = (Fixed expenses + Target profit) / Contribution margin ratio
Plugging in the given values, we get:
Dollar sales = ($296,400 + $7,000) / 0.52
Dollar sales = $303,400 / 0.52
Dollar sales = $583,462 (rounded to the nearest dollar)
Therefore, the closest answer is C) $583,462.
Explanation :
Dollar sales to attain a target profit = (Target profit + Fixed expenses)÷ CM ratio
= ($7,000 + $296,400)÷ 0.52
= $303,400 ÷ 0.52
= $583,462
= ($7,000 + $296,400)÷ 0.52
= $303,400 ÷ 0.52
= $583,462
Learning Objectives
- Figure out the sales quantity required to meet a specific profit objective.