Question

Watson Company has monthly fixed costs of $76,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $14,300, what dollar amount of sales must be made to produce the target income

Answer 1

Answer:

Break-even point (dollars)=  $225,750

Explanation:

Giving the following information:

Fixed costs= $76,000

Contribution margin ratio= 0.4

The company has set a target monthly income of $14,300.

To calculate the break-even point in dollars, we need to include the desired profit to the break-even formula:

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

Break-even point (dollars)=  (76,000 + 14,300) / 0.4

Break-even point (dollars)=  $225,750