Question

RO Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of $81,900 by using the point in sales equations 246,000 Feedback Check My Work 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1. Enter amounts as positive numbers. Chillmax Company Contribution Margin Income Statement At Point in Sales for Target Income Total Sales Total variable cost Total contribution margin Total fixed cost Operating income

Answer 1

To find the profit-maximizing quantity for AAA Aquarium Co., financial metrics like total revenue, marginal revenue, total cost, and marginal cost are calculated for each output level. Diagrams depicting total revenue and total cost, along with marginal revenue and marginal cost, guide in determining the quantity where MR=MC, indicating maximum profit.

Step-by-step explanation:

The AAA Aquarium Co. problem involves calculating various financial metrics to determine the profit-maximizing quantity of output for a firm. To solve this, one needs to tabulate the total revenue, marginal revenue, total cost, and marginal cost for each output level from one to five units. Based on these calculations, diagrams of the total revenue and total cost curves, as well as the marginal revenue and marginal cost curves, are drawn to visually represent the relationships and help identify the profit-maximizing output level.

The profit-maximizing quantity is determined where marginal revenue equals marginal cost (MR = MC). The output level that satisfies this criterion will yield the maximum profit for the firm. If marginal revenue exceeds marginal cost, the firm can increase profit by increasing output. Conversely, if marginal cost is greater than marginal revenue, decreasing output will prevent losses.