Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

How is the sales volume in dollars necessary to reach a target profit calculated?

By dividing total sales by the number of units sold

By dividing the sum of fixed costs and target profit by the contribution margin ratio

By subtracting variable costs from total sales

By multiplying variable costs by the contribution margin ratio

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Verified step by step guidance

Step 1: Understand the concept of contribution margin ratio. The contribution margin ratio is calculated as the contribution margin divided by sales revenue. It represents the percentage of each sales dollar that contributes to covering fixed costs and generating profit.

Step 2: Identify the fixed costs and the target profit. Fixed costs are expenses that do not change with the level of production or sales, and the target profit is the desired profit level the company aims to achieve.

Step 3: Add the fixed costs and the target profit together. This sum represents the total amount that needs to be covered by the contribution margin to achieve the target profit.

Step 4: Divide the sum of fixed costs and target profit by the contribution margin ratio. This calculation determines the sales volume in dollars necessary to reach the target profit.

Step 5: Ensure that all values used in the calculation are accurate and consistent with the company's financial data to avoid errors in determining the required sales volume.