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How did they get the contribution ratio margin of 65%???? Mickey & Mo Drive-In sells...

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Accounting

How did they get the contribution ratio margin of 65%????

Mickey & Mo Drive-In sells burgers and fries. The company had the following sales revenues and profit for June:

Burgers Fries Total
Sales revenue $350,000 $50,000 $400,000
Variable cost 130,000 10,000 140,000
Contribution margin $220,000 $40,000 $260,000
Fixed cost 100,000
Profit $160,000

Assuming the same sales mix, what must Mickey & Mos Drive-In's total sales be to have a target income of $200,000?

  • $410,036

  • $350,000

    Incorrect. With this answer, Mickey & Mos Drive-In would make less than the target income of $200,000.

  • $461,538

    Correct! Breakeven = (Fixed Costs + Target Income)/Average Contribution Margin Ratio = Target Income Sales Dollars = ($100,000 + 200,000)/65% = $461,538.

  • $215,840

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