Question

Remo Company and Angelo Inc. are separate companies that operate in the same industry. Following are variable costing income statements for the two companies showing their different cost structures: Remo Co. Angelo Inc. Sales revenue $ 430,000 $ 430,000 Less: Variable cost 299,000 190,000 Contribution margin $ 131,000 $ 240,000 Less: Fixed cost 25,000 134,000 Net operating income $ 106,000 $ 106,000 Required: Calculate the break-even sales revenue for each company.

Answer 1

Answer:

The break-even sales revenue for each company is $82,074 and $240,100 respectively

Explanation:

The computation of the break even point in dollars is shown below

Break even point = (Fixed expenses) ÷ (Profit volume Ratio)  

where,

And, Profit volume ratio = (Contribution margin) ÷ (selling price) × 100

So, for Remo Co. would equal to

= ($131,000) ÷ ($430,000) × 100 = 30.46%

And, for Angela Inc would equal to

= ($240,000) ÷ ($430,000) × 100 = 55.81%

And, the fixed expenses is $25,000 and $134,000

Now put these values to the above formula  

So, the value would equal to  

= (25,000) ÷ (30.46%)  

= $82,074

And, for Angela Inc, it would be

= (134,000) ÷ (55.81%)  

= $240,100