Question

Gulph Company reported the following results for May: sales $200,000, variable costs $120,000 and fixed costs $60,000. What amount of sales are required in June to achieve $50,000 of net income?

Answer 1

Answer:

Break-even point (dollars)= $275,000

Explanation:

Giving the following information:

sales $200,000

variable costs $120,000

fixed costs $60,000

desired profit= $50,000

To calculate the sales required to achieve the desired profit, we need to use the break-even point in dollars formula:

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

Break-even point (dollars)= (60,000 + 50,000) / [(200,000 - 120,000)/200,000]

Break-even point (dollars)= 110,000 / 0.4

Break-even point (dollars)= $275,000