Question

A firm would require dollar sales of ________ if it has a contribution margin ratio of 30 percent, a target profit of breaking even, and fixed annual costs of $120,000

Answer 1

What are the unit sales required to attain a target profit of $120,000? Unit sales to attain the target profit = (Target profit + Fixed expenses)/Unit Contribution margin. Substituting the values, unit sales = ($120,000 + $40,000)/$40 = 4,000 units.