Answer:
Results are below.
Explanation:
Giving the following information:
Rogers expects first-year sales of $5.50 million. He desires to earn a target pretax profit of $1 million during his first year of operation. Variable costs are 40 percent of sales.
<u>First, we need to determine the variable costs:</u>
Variable costs= 5,500,000*0.4= 2,200,000
<u>Now, the fixed costs:</u>
Fixed cost= 5,500,000 - 2,200,000 - 1,000,000= $2,300,000
<u>To calculate the break-even point in dollars, we need to use the following formula:</u>
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point in units= (2,300,000) / [(5,500,000 - 2,200,000)/5,500,000]
Break-even point (dollars)= 2,300,000 / 0.6
Break-even point (dollars)= $3,833,333.33
