Question

A company provided the following data: Sales $540,000 Variable costs 378,000 Fixed costs 120,000 Expected production and sales in units 40,000 units What is the break-even point in sales dollars

Answer 1

Answer:

$400,000

Explanation:

The computation of the break even point in sales dollars is shown below:

Break even point = (Fixed expenses) ÷ (Profit volume Ratio)  

where,  

Contribution margin  = Sales - variable cost

= $540,000 - $378,000

= $162,000

And, Profit volume ratio = (Contribution margin) ÷ (Sales) × 100

So, the Profit volume ratio = ($162,000) ÷ ($540,000) × 100 = 30%

And, the fixed cost is $120,000

Now placing these values to the above formula  

So, the value would equal to  

= ($120,000) ÷ (30%)  

= $400,000