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4 February, 17:04

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used? Multiple Choice (Fixed expenses + Target net profit) / Total contribution margin (Fixed expenses + Target net profit) / Contribution margin ratio Fixed expenses/Contribution margin per unit Target net profit/Contribution margin ratio

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  1. 4 February, 17:12
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    (Fixed expenses + Target net profit) / Contribution margin ratio

    Explanation:

    The formula to compute the dollar sales volume for attaining the target profit is shown below:

    = (Fixed expenses + target profit) : (Contribution margin ratio)

    where,

    Fixed expenses = Fixed cost

    Target profit = The budgeted profit

    And, the contribution margin ratio is

    Contribution margin ratio = (Contribution margin per unit) : (selling price per unit) * 100

    where,

    Contribution margin per unit = Selling price per unit - Variable expense per unit
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