Question

If fixed costs are $900,000 and the contribution margin ratio is 40%, what is the break-even point (dollars)? a. $3,400,000 b. $2,225,000 c. $2,125,000 d. $1,416,666

Answer 1

The break-even point can be calculated by dividing the fixed costs by the contribution margin ratio.

Step-by-step explanation:

The break-even point in dollars can be calculated using the formula:

Break-even point (dollars) = Fixed costs / Contribution margin ratio

Given that the fixed costs are $900,000 and the contribution margin ratio is 40%, we can substitute these values in the formula:

Break-even point (dollars) = $900,000 / 0.40 = $2,250,000

Therefore, the break-even point in dollars is $2,250,000. None of the answer options provided match this value.