Which expression represents the sales value needed to achieve a given profit?

Which expression represents the sales value needed to achieve a given profit?

• A. ((Fixed costs + required profit) / contribution per unit) × selling price per unit
• B. (Fixed costs + required profit) / selling price per unit
• C. Fixed costs + required profit
• D. ((Fixed costs × required profit) / contribution per unit) × selling price per unit

Answer: (D)

Turning a target profit into the sales value uses how much each unit contributes and the selling price. To hit the profit target, the total contribution must at least cover fixed costs plus the desired profit. If each unit contributes a known amount, the number of units needed is (Fixed costs + required profit) divided by the contribution per unit. Multiply that by the selling price per unit to convert units into currency of sales. Therefore the correct expression is: [ (Fixed costs + required profit) / (contribution per unit) ] × (selling price per unit). This reflects both the per-unit profitability and the revenue per unit. Other forms misplace the components: multiplying fixed costs by the profit target doesn't link to unit contribution; dividing by the selling price per unit ignores the contribution margin; simply adding fixed costs and profit omits the volume required to produce that profit.

Turning a target profit into the sales value uses how much each unit contributes and the selling price. To hit the profit target, the total contribution must at least cover fixed costs plus the desired profit. If each unit contributes a known amount, the number of units needed is (Fixed costs + required profit) divided by the contribution per unit. Multiply that by the selling price per unit to convert units into currency of sales. Therefore the correct expression is: [ (Fixed costs + required profit) / (contribution per unit) ] × (selling price per unit). This reflects both the per-unit profitability and the revenue per unit. Other forms misplace the components: multiplying fixed costs by the profit target doesn't link to unit contribution; dividing by the selling price per unit ignores the contribution margin; simply adding fixed costs and profit omits the volume required to produce that profit.