Answer:
The required level of sales is $240,000.
Explanation:
Contribution margin is the profit margin which is available for the fixed cost of the business as the variable cost already been deducted.
Contribution Margin ratio = 50%
Fixed Cost = $110,000
Desired profit = $10,000
We can calculate the Target sales required to earn desired Profit of $10,000 by using following formula
Target Sales = ( Fixed Cost + Desired Profit ) / Contribution Margin ratio
Target Sales = ( $110,000 + $10,000 ) / 50%
Target Sales = $120,00 / 50%
Target Sales = $120,00 / 0.5
Target Sales = $240,000
It means that the University Golf shop requires $240,000 to earn a pretax profit of $10,000.
