Assume the following information:

Amount Per Unit
Sales $ 300,000 $ 40
Variable expenses 112,500 15
Contribution margin 187,500 $ 25
Fixed expenses 40,000
Net operating income $ 147,500

The dollar sales to attain a target profit of $200,000 is:

Question

Assume the following information:

Amount	Per Unit
Sales	$ 300,000	$ 40
Variable expenses	112,500	15
Contribution margin	187,500	$ 25
Fixed expenses	40,000	 
Net operating income	$ 147,500

The dollar sales to attain a target profit of $200,000 is:

BlackTom AI · Accepted Answer

Contribution margin per unit is $25, so the contribution margin ratio (CM ratio) is 25/40 = 0.625 (62.5%).

1) Relevant knowledge points and concepts
- Contribution margin per unit = Selling price per unit − Variable cost per unit.
- Contribution margin ratio = Contribution margin per unit ÷ Selling price per unit; it represents the portion of each sales dollar available to cover fixed costs and profit.
- Required dollar sales to attain a target profit = (Fixed expenses + Target profit) ÷ Contribution margin ratio.
- Alternatively, required units = (Fixed expenses + Target profit) ÷ Contribution margin per unit, then multiply by price per unit for dollar sales.

2) Complete reasoning process step by step
- Given: Selling price = $40, Variable cost = $15, CM per unit = $25, Fixed expenses = $40,000, Target profit = $200,000.
- Compute CM ratio: 25 ÷ 40 = 0.625.
- Compute total contribution needed = Fixed expenses + Target profit = $40,000 + $200,000 = $240,000.
- Dollar sales required = Total contribution needed ÷ CM ratio = $240,000 ÷ 0.625.

3) Intermediate calculations
- Division: 0.625 = 5/8, so $240,000 ÷ 0.625 = $240,000 × (8/5) = $240,000 × 1.6 = $384,000.
- Alternative units approach: Required units = $240,000 ÷ $25 = 9,600 units. Dollar sales = 9,600 × $40 = $384,000.

4) Why the correct answer is correct
- The calculation directly applies the break-even/target profit formula using the contribution margin ratio. Each dollar of sales contributes $0.625 toward fixed costs and profit; to cover $240,000 of fixed costs and desired profit requires $240,000/0.625 = $384,000 in sales.

5) Why the other options are incorrect
- $347,500, $447,500, and $640,000 do not equal the precise required sales computed by the formula; they produce either insufficient contribution (below required $240,000) or are excessive. Only $384,000 satisfies (Fixed + Target) ÷ CM ratio.

6) Conclusion
- Therefore, the dollar sales to attain a target profit of $200,000 is $384,000, which matches the provided correct answer.

Assume the following information: Amount Per Unit Sales $ 300,000 $ 40 Variable expenses 112,500 15 Contribution margin 187,500 $ 25 Fixed expenses 40,000 Net operating income $ 147,500 The dollar sales to attain a target profit of $200,000 is:Single choice

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