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6 January, 22:08

Rothe company manufactures and sells a single product that it sells for $200 per unit and has a contribution margin ratio of 25%. the company's fixed costs are $43,000. if rothe desires a monthly target operating profit equal to 20% of sales, sales will have to be (rounded) :

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  1. 6 January, 23:49
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    Selling price=200 per unit

    CM ratio = 0.25

    Fixed expenses=43000

    target profit=0.2

    Dollar sales to attain target profit=X

    X = (0.2X+43000) : 0.25

    Cross multiplication

    0.25X=0.2X+43000

    Solve for X

    0.25X-0.2X=43000

    0.05X=43000

    X=43000/0.05

    X=860000

    Unit sales=Dollar sales:selling price

    Unit sales=860,000:200

    Unit sales=4,300 units ... answer
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