Question

The contribution margin ratio is 25% for Crowne Company and the break-even point in sales is $260,000. If Crowne Company's target operating profit is $66,000, sales would have to be: Multiple Choice $524,000.

Answer 1

Answer:

sale is $4000

Explanation:

given data

margin ratio = 25%

sales = $260,000

operating profit = $66,000

solution

we get here Break even sales that is express as

Break even sales = Fixed expense ÷ Contribution Margin Ratio    ...........1

put here value

$260,000 = Fixed Expenses ÷ 25%

Fixed Expenses = $65000

so here we consider sale is = x

we know net income is express as

Net Income = Contribution - Fixed Expenses   ................2

so Contribution = 25% x

put value in equation 2

25% x  - $65000 = $66,000

solve it we get

x = 4000

so sale is $4000