Fixed costs are $80,000 and target profit is $40,000. If contribution margin ratio is 30 percent, what sales are needed?
Correct Answer
C) $400,000.
Sales needed are fixed costs plus target profit divided by contribution margin ratio: ($80,000 + $40,000) / 0.30 = $400,000.
Why This Is the Correct Answer
Sales needed are fixed costs plus target profit divided by contribution margin ratio: ($80,000 + $40,000) / 0.30 = $400,000.
Why the Other Options Are Wrong
Option A: $266,667.
$266,667. is below the supported result for target profit; it likely uses the wrong base, period, or account bucket.
Option B: $300,000.
$300,000. is below the supported result for target profit; it likely uses the wrong base, period, or account bucket.
Option D: $480,000.
$480,000. is above the supported result for target profit; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Two shelves for target profit: cost side first or price side first.
Reference Hint
Study anchor (closed-book): memorize Target profit from CSLB Law and Business Study Guide; CSLB 2026 Law Book / CSLB Law and Business Study Guide Business Finances; know the rule or calculation trigger without relying on exam-room lookup.
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