Question

Presto Corp. had total variable costs of $180,000, total fixed costs of $110,000, and total revenues of $300,000. Compute the required sales in dollars to break even.

Answer 1

Answer:

$230,000

Step-by-step explanation:

Contribution margin = Sales - Variable costs

=($250,000 - $137,500)

= $112,500

Contribution margin ratio = Contribution margin ÷ Sales

= ($112,500 ÷ $250,000)

= 0.45

Basically

Break-even sales = Fixed expenses ÷ Contribution margin ratio

=($103,500 ÷ 0.45)

= $230,000