Question

Liu Sales has two store locations. Sanford has fixed costs of $154,000 per month and a contribution margin ratio of 30%. Orlando has fixed costs of $340,000 per month and a contribution margin ratio of 70%. At what sales volume would the two stores have equal profits or losses?

Answer 1

$465,000

Step-by-step explanation:

The expressions that describe the profits for the Sanford and Orlando store are, respectively:

`P_S=0.3*V-\$154,000\\P_O=0.7*V-\$340,000`

Where 'V' is the sales volume. Both stores will experience the same profits or losses when they are equal. The value of 'V' for which the expressions are equal is:

`0.3*V-\$154,000=0.7*V-\$340,000\\0.4V=\$186,000\\V=\$465,000`

The sales volume at which the two stores have equal profits or losses is $465,000.