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?

• $410,036

• $350,000

  Incorrect. With this answer, Mickey & Mos Drive-In would make less than the target income of $200,000.

• $461,538

  Correct! Breakeven = (Fixed Costs + Target Income)/Average Contribution Margin Ratio = Target Income Sales Dollars = ($100,000 + 200,000)/65% = $461,538.

• $215,840