Zachary Company incurs annual fixed costs of $111,000. Variable costs for Zachary’s product are $21.00 per unit, and the sales price is $35.00 per unit. Zachary desires to earn an annual profit of $57,000.
Required
Use the contribution margin ratio approach to determine the sales
volume in dollars and units required to earn the desired
profit.
Answers :
Desired Sales Dollars = $ 420,000
Desired Sales Units = 12,000 Units
Contribution Margin Per unit s= Selling Price- Variable cost = 35-21 =14
Contribution Margin ratio = contribution Margin / selling Price =14/35 = 40%
Desired Units = ( Fixed Cost + Desired Profit ) / Contribution MArgin
= (111,000+57,000)/ 14 = 12,000 Units (Answer )
Desired Dollars = 12,000*35 =420,000 (Answer)
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