Question

Sabv Corporation's break-even-point in sales is $890,000, and its variable expenses are 70% of sales. If the company lost $39,000 last year, sales must have amounted to:

Answer 1

Sales must have amounted to $760,000

Step-by-step explanation:

We need to calculate from the bottom to the top of the Contribution Income Statement

Step 1

Break Even Point (Dollars) = Fixed Cost ÷ Contribution Margin

Where,

Contribution Margin = 100 % - 70%

= 30 %

Therefore,

Step 2

Fixed Costs = Break Even Point (Dollars) × Contribution Margin

= $890,000 × 30 %

= $267,000

Step 3

We know that,

Net Income/ loss = Contribution - Fixed Costs

Therefore

Contribution = Net Income/ loss + Fixed Costs

= - $39,000 + $267,000

= $228,000

Step 4

Finally, we need to calculate the amount in sales

Sales = 100/30 × $228,000

= $760,000