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Day Company is a medium-sized manufacturer of lamps
Day Company is a medium-sized manufacturer of lamps. During the year, a new line called "Twilight" was made available to Day's customers. The breakeven point for sales of Twilight is $400,000, with a contribution margin of 40%. Assuming that the operating profit for the Twilight line for the year amounted to $200,000, total sales for the year amounted to
a. $600,000 b. $840,000 c. $900,000 d. $950,000
Expert Solution
Computation of Required Sales:
Required Sales = (Fixed Cost+Operating Profit)/Contribution Margin Ratio
Here,
Fixed Cost = Break-even Sales*Contribution Margin Ratio = $400,000*40% = $160,000
Required Sales = ($160,000+$200,000)/40% = $900,000
So, the correct option is C "$900,000".
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