The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $200,000.If Grain Company's target operating profit is $60,000,sales would have to be:
A)$260,000.
B)$440,000.
C)$280,000.
D)$240,000.

Question

Quizplus · Accepted Answer

To find the required sales to achieve the target operating profit, use the formula: Required Sales = (Fixed Costs + Target Profit) / Contribution Margin Ratio. The fixed costs can be calculated from the break-even point: $200,000 * 25% = $50,000. Therefore, Required Sales = ($50,000 + $60,000) / 0.25 = $440,000.

The Contribution Margin Ratio Is 25% for Grain Company and the Break-Even