Question

Gardner Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below. Sales $ 1,500,000 Cost of sales: Direct Material $ 250,000 Direct labor 150,000 Variable Overhead 75,000 Fixed Overhead 100,000 575,000 Gross Profit $ 925,000 Selling and G&A Variable 200,000 Fixed 250,000 450,000 Operating Income $ 475,000 The break-even point (rounded to the nearest dollar) for Gardner Corporation for the current year is:

Answer 1

Answer:

$636,364

Explanation:

Calculation to determine what The break-even point for Gardner Corporation for the current year is

First step is to calculate the Variable costs

Variable costs = $250,000 + $150,000 + $75,000 + $200,000

Variable costs = $675,000

Second step is to calculate the Contribution margin ratio

Contribution margin ratio = (Sales - Variable costs) / Sales

Contribution margin ratio= ($1,500,000 - $675,000) / $1,500,000

Contribution margin ratio= 0.55*100

Contribution margin ratio = 55%

Now let calculate the Break-even point

Break-even point = Fixed costs / Contribution margin ratio

Break-even point= ($100,000 + $250,000) / 0.55

Break-even point = $636,364

Therefore The break-even point (rounded to the nearest dollar) for Gardner Corporation for the current year is:$636,364