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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?Ans) $215,000
Workings:
Using the given sales & profit figures, we can calculate CM.
CM = 200,000 x 40% = $80,000Since CM = FC + Profit,
so, CM – Profit = FC
80,000 – 10,000 = $70,000 = FCFor a target profit of $16,000,
CM = FC + Target Profit
CM = 70,000 + 16,000
CM = 86,000For Sales Revenue, we’ll simply divide CM by its %.
Sales = 86,000/40%
Sales = $215,000Hope it helped you.
If you have any query, feel free to ask.
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