Question

g Artis Sales has two store locations. Store A has fixed costs of $125,000 per month and a variable cost ratio of 60%. Store B has fixed costs of $200,000 per month and a variable cost ratio of 30%. At what sales volume would the two stores have equal profits or losses

Answer 1

Answer:

$250,000

Explanation:

Calculation to determine At what sales volume would the two stores have equal profits or losses

First step is to determine the Difference in Fixed Cost

Fixed Cost - Store B $200,000

Fixed Cost - Store A $125,000

Different in Fixed Cost $75,000

($200,000-$125,000)

Second step is to determine the Change in Variable Cost Ratio

Variable Cost Ratio - Store A 60%

Variable Cost Ratio - Store B 30%

Change in Variable Cost Ratio 30%

(60%-30%)

Now let determine what the sales volume would the two stores have equal profits or losses

Using this formula

Sales volume = Fixed Cost/Change in Variable Cost Ratio

Let plug in the formula

Sales volume=$75,000/30%

Sales volume=$250,000

Therefore the sales volume in which the two stores would have equal profits or losses is $250,000