Question

Assume the following information for a company with only two products: Product A Product B Total Sales $ 600,000 $ 400,000 $ 1,000,000 Variable expenses $ 200,000 $ 100,000 $ 300,000 If the break-even sales point is $580,000, then what is the total amount of fixed expenses

Answer 1

Answer: $406,000

Explanation:

The following can be deduced from the question:

Total sales = $1,000,000

Variable cost = $300,000

Contribution = Sales - Variable cost

= $1,000,000 - $300,000

= $700,000

Contribution ratio = $7000,00/$1,000,000 × 100 = 70%

Fixed cost = $580,000 × 70%

= $580,000 × 0.7

= $406,000