Question

Last year, Courtney Company reported sales of $640,000, a contribution margin of $160,000, and an operating loss of ($40,000). Based on this information, how much sales revenue did the company need to generate in order to break-even?

Answer 1

Answer:

 Break-even sales         =  $800,000.

Explanation:

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

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

Contribution margin (%) = Contribution/ sales ×  100

                                        = 160,000/640,000

                                        = 0.25 ×  100

                                        = 25%

Fixed cost =   Contribution -   operating income

                                    = 160,000- -( 40,000)

                             = 160,000 + 40,000

                             = 200,000

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

                                       =  $800,000.