Question

Bloom Company management predicts that it will incur fixed costs of $259,000 and earn pretax income of $493,100 in the next period. Its expected contribution margin ratio is 69%. Compute the amount of total dollar sales.

Answer 1

To calculate the total dollar sales for Bloom Company, the contribution margin in dollars ($752,100) is divided by the contribution margin ratio (69%), resulting in total expected sales of $1,090,000.

Step-by-step explanation:

To compute the total dollar sales for Bloom Company, we need to use the contribution margin ratio, which is the percentage of each sales dollar that contributes to covering fixed costs and generating pre-tax income. The contribution margin ratio is given as 69%.

To find the sales, we must first calculate the contribution margin in dollars, which is the pre-tax income plus fixed costs. Then we can find the total sales by dividing the contribution margin in dollars by the contribution margin ratio.

First, we calculate the total contribution margin:
Contribution Margin = Fixed Costs + Pre-tax Income = $259,000 + $493,100 = $752,100.

Next, we calculate the total sales using the contribution margin ratio:
Total Sales = Contribution Margin / Contribution Margin Ratio = $752,100 / 0.69 = $1,090,000.

Therefore, the total dollar sales expected by Bloom Company is $1,090,000.