First of all, the fixed expenses will be calculated -
Profit = (Sales * Contribution Margin) - Fixed expenses
Loss = $ 39,000, Sales = $ 870,000 and Contribution margin = 40 %
Using the equity of Profit -
- $ 39,000 = ( $ 870,000 * 40 %) - Fixed expenses
Fixed Expenses = $ 348,000 + $ 39,000 = $ 387,000
Now, Break-even point will be calculated as -
Break-even point = Fixed cost ÷ Contribution Margin
Break-even point = $ 387,000 ÷ 40 % = $ 967,500
