Question

Stewart'sStewart's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $ 630 comma 000$630,000 and a contribution margin of 7070​% of revenues. StewartStewart feels like​ he's in a giant squeeze​ play: The automotive manufacturers are demanding lower​ prices, and the steel producers have increased raw material costs. Stewart'sStewart's contribution margin has shrunk to 4040​% of revenues. The​ company's monthly operating​ income, prior to these​ pressures, was $ 105 comma 000$105,000. Read the requirementsLOADING.... Requirement 1. To maintain this same level of​ profit, what sales volume​ (in sales​ revenue) must StewartStewart now​ achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. ( Fixed expenses + Operating income ) / Contribution margin ratio = Target sales in dollars ​(Round your answer up to the nearest whole

Answer 1

Break-even point (dollars)= $1,837,500

Step-by-step explanation:

Giving the following information:

The company has monthly fixed expenses of $630,000 and a contribution margin of 70​% of revenues.

Stewart's contribution margin has shrunk to 40​% of revenues. The​ company's monthly operating​ income, before these​ pressures, was $105,000.

We have to find the level of sales to maintain the same profit in dollars.

Break-even point (dollars)= (fixed costs + profit) / contribution margin ratio

Break-even point (dollars)= (630,000 + 105,000)/0.4= $1,837,500