Answered

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A company had the following data: Sales price: $ 60.00 per unit. Variable costs: $ 15.00 per unit. Total Fixed Costs: $ 135,000 How much in dollars must the company sell to earn a target profit of $90,000

Sagot :

Answer:

The company must sell $300,000 to earn a target profit of $90,000.

Explanation:

Contribution margin per unit = Sales price per unit - Variable costs per unit. = $60.00 - $15.00 = $45

Contribution margin ratio = Contribution margin per unit / Selling price per unit = $45 / $65 = 0.75, or 75%

Total Fixed Costs = $135,000

Target profit = $90,000

Sales in dollars to earn the target profit = (Fixed cost + Targeted profit) / Contribution margin ratio = ($135,000 + $90,000) / 75% = $300,000

Therefore, the company must sell $300,000 to earn a target profit of $90,000.

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