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8 June, 21:09

Santiago company incurs annual fixed costs of $66,000. variable costs for santiago's product are $34 per unit, and the sales price is $50 per unit. santiago desires to earn an annual profit of $34,000. required use the contribution margin ratio approach to determine the sales volume in dollars and units required to earn the desired profit.

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  1. 8 June, 21:33
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    Answer: 6250

    Explanation:

    From the question, we are informed that Santiago company incurs annual fixed costs of $66,000. variable costs for santiago's product are $34 per unit, and the sales price is $50 per unit. santiago desires to earn an annual profit of $34,000.

    The contribution margin ratio approach to determine the sales volume in dollars and units required to earn the desired profit for thus:

    Contribution margin ratio = (Sales price - Variable cost) / Sales price

    = (50-34) / 50

    = 16/50

    = 0.32

    Sales = (66,000 + 34,000) / 0.32

    = 100,000/0.32

    = 312,500

    Sales volume in units will be sales divided by price. This will be:

    = 312,500/50

    = 6250
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