Question

Calculate the sales in dollars required to earn the target profit of $100,000 for Happy Inc. using the following information: Unit selling price $60 Unit contribution margin $24 Fixed costs $250,000

Answer 1

$875,000

Step-by-step explanation:

The computation of the break even point for earn the target profit is shown below:

Break even point = (Fixed costs + target profit) ÷ (Profit volume Ratio)

where,

Profit volume ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100

So, the Profit volume ratio = ($24) ÷ ($60) × 100 = 40%

So, the value would equal to

= ($250,000 + $100,000) ÷ (40%)

= $875,000