Question

Jane’s New Cosmetics is considering opening a new store and has determined that total monthly fixed costs will be $23,500. Jane’s average contribution margin rate is 32.4%. Her breakeven for the projected new store would be approximately:

Answer 1

Break even point in dollars = $72,530.86

Step-by-step explanation:

As we know, break even point is defined as that level of sales whether in units or in dollars where the company is able to meet all the cost and do not have any profit. that is, a no profit no loss situation:

In financial terms it is calculated as follows:

Break even point in dollars =
`(Fixed \: Cost)/(Contribution\: Margin)`

Here, we are provided that

Fixed Cost = $23,500

Contribution Margin = 32.4%

Break even point in dollars =
`(23,500)/(0.324)`

= $72,530.86