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FrozenT [24]
3 years ago
13

Last year, Courtney Company reported sales of $640,000, a contribution margin of $160,000, and an operating loss of ($40,000). B

ased on this information, how much sales revenue did the company need to generate in order to break-even?
Business
1 answer:
Elanso [62]3 years ago
3 0

Answer:

 Break-even sales         =  $800,000.

Explanation:

<em>The beak-even point is the units of products to be sold or number of customers to be served to enable a business to cover exactly its total cost from the revenue. At the break-even point, the business makes no profit or no loss because the contribution from sales exactly equals the total fixed cost</em>

<em>Break-even in sales revenue = Total fixed cost/Contribution margin</em>

<em>Contribution margin (%) = Contribution/ sales ×  100</em>

                                        = 160,000/640,000

                                        = 0.25 ×  100

                                        = 25%

<em>Fixed cost =   Contribution -   operating income</em>

                                    = 160,000- -( 40,000)

                             = 160,000 + 40,000

                             = 200,000

<em>Break-even point sales = 200,000/25%</em>

                                       =  $800,000.

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