Desired sales for a target profit equals (using P/V):
A(Fixed cost + Target profit) / P/V
B(Fixed cost − Profit) / P/V
CFixed cost / Target profit
DTarget profit / Fixed cost
Answer & Solution
Correct answer: A. (Fixed cost + Target profit) / P/V
1. Required contribution = Fixed cost + Target profit.
2. Sales required = Contribution / P/V ratio.
3. Therefore Sales = (Fixed cost + Target profit) / P/V.
4. The other options invert or omit a component.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.7 ¶2_
Related questions
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