A Company Has Fixed Costs of $270,000, a Unit Contribution

question 46

Multiple Choice

A company has fixed costs of $270,000, a unit contribution margin of $14, and a contribution margin ratio of 55%. If the firm wants to earn a target $60,000 pretax income, what amount of sales must the company make (rounded to the nearest whole dollar) ?

• A) 490,909.
• B) 381,818.
• C) 330,000.
• D) 600,000.
• E) 109,090.

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window; also used in discounted cash flow (DCF) analysis to determine present value.

NPV

A strategy employed in capital budgeting, Net Present Value is instrumental in determining the financial viability of an investment or project.

Projected Cash Flows

Estimates of the amounts of money a company expects to receive and pay out over a certain period in the future.

Market Test

An evaluation conducted to gauge the potential success of a product or service in the market, often via limited release or sample group feedback.