Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Selling price= 225
Unitary variable cost= 180
Fixed costs= 432,000
The break-even point method is useful to determine the level of unit and sales in dollars required to cover for the fixed costs.
To calculate the break-even point in units, we need to use the following formula:
Break-even point= fixed costs/ contribution margin
Break-even point= 432,000/ (225 - 180)= 9,600 unts
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 432,000/ (45/225)= $2,160,000
Now, we can prove it:
Sales= 9,600*225= 2,160,000
Total variable cost= (9,600*180)= (1,728,000)
Contribution margin= 432,000
Fixed costs= (432,000)
Net operating profit= 0
