Question

Santa company. produces a single product whose variable costs are 50% of unit sales price, and its fixed costs are $50,000. What amount of revenue is required to generate a profit of $50,000?

Answer 1

Step-1:Calculation of contribution margin ratio
	Contribution margin ratio			=	1-Variable cost ratio
				=	1-0.50
				=	50%
Step-2:Calculation of required sales revenue
	Fixed Costs				$           50,000
	Target Profit				$           50,000
	Target Contribution margin				$       1,00,000
	/ Contribution margin ratio				50%
	Target Sales revenue				$       2,00,000
Thus,
		Required amount of revenue is			$       2,00,000