Question

Current operating income for Bay Area Cycles Co. is $34,000. Selling price per unit is $100, the contribution margin ratio is 25%, and fixed expense is $136,000. Required:1. Calculate Bay Area Cycle’s breakeven point in units and total sales dollars.

Answer 1

Answer:

break even point in unit =5440 units

break even point in sales = $544000

total sale = $680000

Explanation:

given data

Current operating income = $34,000

Selling price = $100

margin ratio = 25%

to find out

Bay Area Cycle’s break even point in units and total sales dollars

solution

we get here first break even point that is express as

break even point in unit =  $\frac{fixed\ cost}{contribution\ per\ unit}$   ..................1

break even point in unit =  $\frac{136000}{100*0.25}$

break even point in unit =5440 units

so

break even point in sales =  $\frac{fixed\ cost}{margin\ ratio}$   ..................2

break even point in sales = $\frac{136000}{0.25}$

break even point in sales = $544000

and

total sales will be

total sale =  $\frac{operating\ income+ fixed\ expense}{margin\ ratio}$   ..................3

total sale =  $\frac{34000+136000}{0.25}$

total sale = $680000