Carrie sells three products. Last month's results are as follows: P1 P2 P3Revenues$150,000 $225,000 $225,000Variable costs 60,000 210,000 120,000Total fixed costs are $100,000 marketing and $125,000 administrative.Required:(a) What was the contribution margin ratio?(b) What sales volume does Carrie need to achieve a $100,000 monthly profit?(c) What will profit be if Carrie increases sales by 20%?
What will be an ideal response?
(a)
($600,000 ? $390,000)/$600,000 = 35%.
(b)
($225,000 + $100,000)/35% = $928,571.
(c)
($600,000 ? $390,000) × 1.2 = $252,000 ? $225,000 = $27,000.
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