Liu Sales has two store locations. Sanford has fixed costs of $26,000 per month and a contribution margin ratio of 35%. Orlando has fixed costs of $440,000 per month and a contribution margin ratio of 65%. At what sales volume would the two stores have equal profits or losses?
a. cannot determine with the information given
b. $700,000
c. $600,000
d. $1,480,000
let the sale volume be x:
at this sale volume both the profits are equal:
profit = (sales * contribution margin ratio) - fixed cost
profit of sanford store = (x*0.35) - 26,000
profit of orlando store = (x*0.65)-440,000
at x both the profits are same.
(x*0.35)-26,000 = (x*0.65)-440,000
=>0.30x = 414,000
=>x =$1,380,000.
so at the sales volume of $1,380,000 both the stores will have equal profits.
Liu Sales has two store locations. Sanford has fixed costs of $26,000 per month and a...
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