Predicting sales and variable costs using contribution margin. Bloom company management predicts that it will incur fixed costs of $160,000 and earn pre-tax income of $164,000 in the next period. Its expected contribution margin ratio is 25%. Use this information to compute the amounts of (1) Total Dollar sales. (2) Total Variable costs.
Added by Alexander J.
Step 1
The contribution margin ratio is the percentage of each dollar of sales that contributes to covering fixed costs and generating profit. The formula to calculate the total dollar sales is: Total Dollar Sales = (Fixed Costs + Pre-tax Income) / Contribution Margin Show more…
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