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Stels [109]
4 years ago
5

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed co

sts are $800,000. Current sales volume is $4,200,000. Compute the break-even point in dollars.
Business
1 answer:
mojhsa [17]4 years ago
7 0

Answer: The break even point in dollars is $2,000,000.

We calculate the break even point (BEP) in dollars as follows:

\mathbf{BEP = \frac{Fixed Costs}{Contribution Margin Ratio}}

We calculate Contribution Margin ratio as :

\mathbf{Contribution Margin Ratio = \frac{Sales - Variable Costs}{Sales}}

\mathbf{Contribution Margin Ratio = \frac{450 - 270}{450}} = 0.4

Substituting the Contribution Margin Ratio in the break even point formula we get,

\mathbf{BEP = \frac{800000}{0.4}}

BEP = $2,000,000


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