DETERMINATION OF SALES IN DOLLARS TO MEET THE TARGET PROFIT OF $150 :
Formulae :
Desired sales ( in $ ) = (Fixed costs+Desired profit) ÷ P/V Ratio
Given
Fixed costs = $50, Sales revenue = $700, Variable costs = $560.
Contribution = sales - variable costs = $700 - $560 = $140
P/V Ratio = (Contribution÷Sales)×100 = ($140÷$700)×100 = 20%
NOW, In order to attain target profit of $150,
Desired sales
= (fixed costs+Desired profit) ÷ P/V Ratio
= ($50+$150) ÷ 20%
= $200 ÷ 20%
= $1000.
The correct option is E. $1000.
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