Question

Wimpy Inc. produces and sells a single product. The selling price of the product is $185.00 per unit and its variable cost is $55.50 per unit. The fixed expense is $404,670 per month. The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice $1,348,900 $944,230 $578,100 $404,670

Answer 1

The formula for the calculation is

CM ratio = Unit contribution margin ÷ Unit selling price

The break-even in monthly dollar sales is closest to $578,100

Explanation:

The formula for the calculation is

CM ratio = Unit contribution margin ÷ Unit selling price

Given that

Selling price of the product=$185.00 per unit

variable cost=$55.50 per unit

fixed expense=$404,670 per month

= ($185.00 per unit − $55.50 per unit) ÷ $185.00 per unit

= $129.50 per unit ÷ $185.00 per unit = 0.70

Dollar sales to break even = Fixed expenses ÷ CM ratio

= $404,670 ÷ 0.70

= $578,100

The break-even in monthly dollar sales is closest to $578,100