Question

ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales $ 715,860 Variable costs 572,688 Contribution margin 143,172 Fixed costs 188,000 Net loss $ (44,828 ) Problem 18-4A Part 2 2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price.

Answer 1

Answer:

$940,000

Explanation:

The computation of the break even point in dollar sales is shown below:

= (Fixed cost ) ÷ (Profit volume ratio)

where,  

Fixed cost = $188,000

And the profit volume ratio would be

= (Contribution margin) ÷ (Sales) × 100

where Contribution margin equal to

= Sales - variable cost

= $715,860 - $572,688

= $143,172

So, the contribution margin ratio is

= ($143,172) ÷ ($715,860)

= 20%

Now the break even point in dollars is

= $188,000 ÷ 0.20

= $940,000