Question

Ray Company incurs annual fixed costs of				$70,090
Ray's variable costs per unit equal				$23.10
Ray's selling price per unit				$35.00
Budgeted profit (before taxes) for next year				$62,000
What is the sales volume in dollars that Ray has to achieve in order to achive the target profit?
Type ONLY the number in the answer box without any text.
Round your answer to the nearest dollar.
Sales dollars to achive the target profit equals

Answer 1

Ray's selling price per unit = $ 35 per unit .

Variable cost per unit = $ 23.10 per unit.

Thus contribution margin per unit = selling price per unit - variable cost per unit.

Contribution margin per unit = $ 35 - $ 23.10

Contribution margin per unit = $ 11.90.

Thus contribution margin Ratio = Contribution margin per unit / sales price per unit.

Contribution margin ratio = $ 11.90 / 35 = 34 %.

Since we have contribution margin rato and fixed cost and desired profit information we can calculate the sales volume for target profit as follows:.

Sales volume in dollars for target profit of $ 62000 =( Target profit + fixed cost ) / contribution margin ratio.

Sales volume in dollars for target profit = ( 62000 + 70090 ) / 34 %.

Sales dollars to achieve target profit = $ 132090 / 34 %

Sales dollars to achieve target profit equals $ 388,500.

Answer = $ 388,500.