A company has a single product with a contribution of sales ratio 40%. The total sales and net profit in a month were $200,000 and $10,000 respectively. the company has a target monthly profit of $16,000.
What sales revenue is required to achieve monthly profit?
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CVP / Breakeven (Question)
Ans) $215,000
Workings:
Using the given sales & profit figures, we can calculate CM.
CM = 200,000 x 40% = $80,000
Since CM = FC + Profit,
so, CM - Profit = FC
80,000 - 10,000 = $70,000 = FC
For a target profit of $16,000,
CM = FC + Target Profit
CM = 70,000 + 16,000
CM = 86,000
For Sales Revenue, we'll simply divide CM by its %.
Sales = 86,000/40%
Sales = $215,000
Hope it helped you.
If you have any query, feel free to ask.
Sir, what is CM? going through the note examples are not worked out how them do we get solutions? Also, is MA2 lectures not available?
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