<p>Let profits be $P$, total revenue or sales be $TR$, total variable cost $V$ and fixed cost $F$. So total cost, $TC = V + F$ and<br> $P = TR - TC = TR - (V + F)$.<br>
We have $P = 0.2 \times TR$, $V = 0.6 \times TR$ and $F = 360,000$. Substitute $P, V \text{and} \ F$:<br></p>

<p>$0.2 \times TR = TR - (0.6 \times TR + 360,000)$<br><br>
Now solve the above equation for $TR$ which turns out to be $1,800,000$.</p>

CC BY-SA 3.0
2016-06-16T11:58:06.180Z
2016-06-16T12:12:34.483Z
2016-06-16T12:12:34.483Z
rsl
<p>W LTD wishes to attain a before tax-net profit equal to $20\%$ of sales revenue. Variable costs are $60\%$ of sales and fixed costs are $360,000$. Calculate the dollar amount of sales necessary for archiving the profits goal. </p>

<p>My attempt:<br> 
$Sales=fixed \ costs+variable \ costs+desired \ profit$<br>
But I failed to get the answer given. </p>

CC BY-SA 3.0
2016-06-16T07:32:09.693Z
Could you expand a bit, and where does that exercise come from?
clem steredenn
CC BY-SA 3.0
2016-06-19T21:42:50.723Z
This is an algebra question tangentially related to the field of economics, so I'll have to vote to close. To solve your equation, substitute in $\text{variable costs}$ for $\text{sales} \cdot 0.6$ and $\text{profit}$ for $\text{sales} \cdot 0.2$ and substitute in the fixed cost. Then solve for sales.
Kitsune Cavalry
<self-study><accounting>
Contribution Margin
Mathxx
# Contribution Margin

(Asked by: username_0 on 2016-06-16)

W LTD wishes to attain a before tax-net profit equal to $20\%$ of sales revenue. Variable costs are $60\%$ of sales and fixed costs are $360,000$. Calculate the dollar amount of sales necessary for archiving the profits goal.

My attempt:  
$Sales=fixed \ costs+variable \ costs+desired \ profit$  
But I failed to get the answer given.

**Tags:** self-study, accounting

> **Comments:**
> **username_1**: Could you expand a bit, and where does that exercise come from?  
> **username_2**: This is an algebra question tangentially related to the field of economics, so I'll have to vote to close. To solve your equation, substitute in $\text{variable costs}$ for $\text{sales} \cdot 0.6$ and $\text{profit}$ for $\text{sales} \cdot 0.2$ and substitute in the fixed cost. Then solve for sales.  

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## 1 answers

### Answer by username_3 on 2016-06-16. Score: 0

Let profits be $P$, total revenue or sales be $TR$, total variable cost $V$ and fixed cost $F$. So total cost, $TC = V + F$ and  
 $P = TR - TC = TR - (V + F)$.  
We have $P = 0.2 \times TR$, $V = 0.6 \times TR$ and $F = 360,000$. Substitute $P, V \text{and} \ F$:

$0.2 \times TR = TR - (0.6 \times TR + 360,000)$  
  
Now solve the above equation for $TR$ which turns out to be $1,800,000$.


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