BUS 203 LS #3

Company A has fixed costs of $564,000 and wishes to earn a profit of $800,000 this year. if company A has a contribution margin ratio of 62%, what amount of sales dollars must be sold to reach the target profit?

564,000+800,000/ 0.62= 2, 200, 000

the calculation of contribution margin ratio is

contribution margin/sales

what does CVP stand for?

cost volume profit

CVP analysis focuses on how profits are affected by what

mix of products sold selling price unit variable cost sales volume total fixed costs

how do you calculate profit

multiply the contribution margin per unit by sales volume and then subtract total fixed cost

what must be subtracted from sales to reach the contribution margin?

variable direct materials variable overhead variable selling and administrative costs variable direct labor