Question

Santiago company incurs annual fixed costs of $66,000. variable costs for santiago's product are $34 per unit, and the sales price is $50 per unit. santiago desires to earn an annual profit of $34,000. required use the contribution margin ratio approach to determine the sales volume in dollars and units required to earn the desired profit.

Answer 1

Answer: 6250

Explanation:

From the question, we are informed that Santiago company incurs annual fixed costs of $66,000. variable costs for santiago's product are $34 per unit, and the sales price is $50 per unit. santiago desires to earn an annual profit of $34,000.

The contribution margin ratio approach to determine the sales volume in dollars and units required to earn the desired profit for thus:

Contribution margin ratio = (Sales price - Variable cost)/Sales price

= (50-34)/50

= 16/50

= 0.32

Sales = (66,000 + 34,000)/0.32

= 100,000/0.32

= 312,500

Sales volume in units will be sales divided by price. This will be:

= 312,500/50

= 6250