Question

Athletico Inc. manufactures warm-up suits. The company’s projected income for the coming year, based on sales of 160,000 units, is as follows: Sales $ 8,000,000 Operating expenses: Variable expenses $ 2,000,000 Fixed expenses 3,000,000 Total expenses 5,000,000 Net income $ 3,000,000

Calculate the firm’s break-even point for the year in sales dollars.

Answer 1

The break-even point for the year in sales dollars is approximately $833,333.

Step-by-step explanation:

To calculate the break-even point for the year in sales dollars, we need to determine the level of sales at which the net income is zero. In other words, it is the point at which the total revenue equals the total expenses. In this case, the total revenue is $8,000,000 and the total expenses are $5,000,000. So, the break-even point can be calculated as follows:

Break-even point = Total expenses / Contribution margin

The contribution margin is calculated by subtracting the total variable expenses from the total revenue. In this case, the total variable expenses are $2,000,000.

Break-even point = $5,000,000 / ($8,000,000 - $2,000,000)

Break-even point = $5,000,000 / $6,000,000

Break-even point = 0.83333

Therefore, the firm's break-even point for the year in sales dollars is approximately $833,333.