Question

The manager at TV Land Productions reported total sales revenue of $900,000. The variable expenses were $300,000, and there were $325,000 of total fixed expenses. Calculate the contribution margin ratio and use the contribution margin shortcut formula to predict the breakeven point in dollars.

Answer 1

Answer:

0.67; $485,074.67

Explanation:

Given that,

Total sales revenue = $900,000

Variable expenses = $300,000

Total fixed expenses = $325,000

Contribution margin:

= Sales revenue - Variable expenses

= $900,000 - $300,000

= $600,000

Contribution margin ratio:

= Contribution margin ÷ Sales revenue

= $600,000 ÷ $900,000

= 0.67

Break-even point in dollars:

= Total fixed expenses ÷ Contribution margin ratio

= $325,000 ÷ 0.67

= $485,074.6