How is target profit volume calculated?
A)The sum of fixed costs and target profit divided by contribution margin per unit.
B)The sum of fixed costs and target profit divided by variable cost per unit.
C)The sum of fixed costs and target profit divided by sales price per unit.
D)None of the answers is correct.

Question

Quizplus · Accepted Answer

Target profit volume is calculated by adding fixed costs and the desired profit, and then dividing the sum by the contribution margin per unit. The contribution margin per unit is the difference between the sales price per unit and the variable cost per unit. Therefore, choice A is the correct answer.

How Is Target Profit Volume Calculated