Question

ingrum corporation produces and sells two products. in the most recent month, product r38t had sales of $20,000 and variable expenses of $7,400. product x08s had sales of $39,000 and variable expenses of $6,170. the fixed expenses of the entire company were $41,160. the break-even point for the entire company is closest to:

Answer 1

The break-even point is closest to $50,846.

Let understand that the break-even point refers to the point where the total revenue equals the total costs.

• Below are steps to help us derive the break-even point.

Particulars                      R38T          X08S           Total

Sales                             $20,000     $39,000     $59,000

Variable costs              $7,400       $6,170        $13,570

Contribution margin   $12,600     $32,830     $45,430

Total Contribution margin ratio = Total Contribution / Total Sales

Total Contribution margin ratio = $33,150 / $51,000

Total Contribution margin ratio = 0.65

Total Contribution margin ratio = 65%

Break even point = Fixed costs / Contribution margin ratio

Break even point = $33,050 / 0.65

Break even point = $50,846

In conclusion, the break-even point for the entire company is closest to $50,846.

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