Question

Zander Company has fixed costs of $ 14 comma 000. The​ company's contribution margin ratio is 56​%. What is the breakeven point in sales​ dollars? (Round your answer to the nearest​ dollar.) A. $ 25 comma 000 B. $ 2 comma 240 C. $ 87 comma 500 D. $ 7 comma 840 g

Answer 1

Answer:

Option A $25000

Explanation:

The breakeven point in sales dollars can be calculated by using the following formula:

Breakeven Sales In Dollars = Fixed Cost / Contribution Margin ratio

The fixed cost here is $14000 and the contribution margin ratio is 0.56.

So by putting the values, we have:

Breakeven Sales In Dollars = $14000 / 0.56 = $25000

So the sales required to breakeven at a contribution margin of 0.56 is $25000. Remember that Fixed cost though remains the same but contribution margin ratio changes when the variable cost or selling price changes. So if the changes in variable cost or selling prices are witnessed to achieve the maximum profit possible, then the managers must recalculate the breakeven point because it has been altered due to these changes.

Answer 2

Answer:

A. $25 comma 000

Explanation:

1. Breakeven Point on sales dollars can be calculated using this equation:

$BEP=\frac{Fixed Costs}{Fixed Costs- Contribution Margin}= \frac{Fixed Costs}{Contribution Margin Ratio}$

In this case, we know that:

$Fixed Costs= 14,000\\Contribution Margin Ratio= 56\%$

2. Replacing Values:

$BEP=\frac{\ 14,000}{56\%} =\ 25,000$

The company needs to have sales of $25,000 to breakeven at a 56% contribution margin ratio. It means that the company must determine the appropiate strategy to reach the sale level required.