Orange Dot Inc sells a single product for 14 Variable costs

Orange Dot, Inc sells a single product for $14. Variable costs are $6 per unit and fixed costs total $300,000 at a volume of 55,000

What dollar sales level would Orange Dot have to achieve to earn a target profit of $225,000?

Solution

selling price

14

less variable cost

6

contribution margin

8

contribution margin ratio = contribution/sales

0.57143

fixed cost

300000

target profit

225000

break even point in sales to achieve the target profit

(fixed cost+ target profit)/contribution margin ratio

(300000+225000)/.57

918747.7