Question

Erza company manufactures various size swords. Erza did an analysis and has a contribution margin ratio of 30%. This month, profit was $17,400, and fixed costs were $14,700. How much was Erza's sales revenue?

a. $35,121
b. $32,100
c. $107,000
d. $9,630

Answer 1

To calculate Erza's sales revenue, use the contribution margin ratio formula: 30% = (Sales Revenue - Variable Cost) / Sales Revenue. By solving for Sales Revenue, we get $34,800.

Step-by-step explanation:

To calculate Erza's sales revenue, we need to use the contribution margin ratio formula. The contribution margin ratio is the difference between the selling price and variable cost per unit, divided by the selling price. We know that the contribution margin ratio is 30%, profit is $17,400, and fixed costs are $14,700. Let's denote sales revenue as 'X'.

Contribution Margin Ratio = (Sales Revenue - Variable Cost) / Sales Revenue

30% = (X - Variable Cost) / X

Solving for X, we find that Sales Revenue = $34,800. Therefore, the answer is option a. $35,121.