Question

Sniffles, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $2,404,000. To achieve a target profit of $9,300,000, Sniffles' sales must be __________.

Answer 1

To achieve a target profit of $9,300,000 with a contribution margin ratio of 77% and fixed expenses of $2,404,000, Sniffles, Inc. must reach sales of $15,200,000.

Step-by-step explanation:

To calculate the required sales for Sniffles, Inc. to achieve a target profit of $9,300,000, we need to use the formula Target Profit = (Sales x Contribution Margin Ratio) - Fixed Expenses. Here, the contribution margin ratio is given as 77%, and fixed expenses are $2,404,000.

Let 'S' be the required sales. So, plug in the values to get $9,300,000 = (S x 0.77) - $2,404,000. To find 'S', add $2,404,000 to both sides and then divide by 0.77.

Following these steps:

$9,300,000 + $2,404,000 = S x 0.77

$11,704,000 = S x 0.77

S = $11,704,000 / 0.77

S = $15,200,000

Therefore, to achieve a target profit of $9,300,000, Sniffles' sales must be $15,200,000.