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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?
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$410,036
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$350,000
Incorrect. With this answer, Mickey & Mos Drive-In would make less than the target income of $200,000.
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$461,538
Correct! Breakeven = (Fixed Costs + Target Income)/Average Contribution Margin Ratio = Target Income Sales Dollars = ($100,000 + 200,000)/65% = $461,538.
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$215,840
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