Question

Cullumber Company estimates that variable costs will be 56% of sales, and fixed costs will total $677,600. The unit selling price of the product is $5. What is the breakeven sales level for Cullumber Company?

a) $1,014,000
b) $1,205,000
c) $1,413,000
d) $1,525,000

Answer 1

The breakeven sales level for Cullumber Company, calculated using the provided fixed costs and variable cost percentage, results in $1,540,000; however, none of the given options matches this result.

Step-by-step explanation:

To calculate the breakeven sales level for Cullumber Company, we use the formula:

Breakeven Sales Level = Fixed Costs / (1 - Variable Cost Percentage)

Given that fixed costs are $677,600 and the variable costs are 56% of sales, we can plug these values into our formula:

Breakeven Sales Level = $677,600 / (1 - 0.56) = $677,600 / 0.44 = $1,540,000

This means none of the provided options (a) $1,014,000, (b) $1,205,000, (c) $1,413,000, or (d) $1,525,000 are correct. However, it seems there might be a miscalculation or a typo as the closest number to the calculated breakeven point is $1,525,000 (option d).