Question

Company's breakeven sales revenue is $840,000, and its variable expenses are 75% of sales. If the its sales tevenue must have amounted to: (Hint: Contribution Margin Ratio = 1 - Patio of Variable Expenses to Sales) Multiple choice

a.$704,000
b.$906000
c.$596000
c.$572000

Answer 1

The actual sales revenue that a company with a break-even point of $840,000 and variable expenses at 75% of sales would need to achieve is $3,360,000, given a contribution margin ratio of 0.25.

Step-by-step explanation:

The break-even sales revenue for a company is the amount at which the total revenue equals the total costs, resulting in zero profit or loss. Given the break-even sales revenue of $840,000 and variable expenses being 75% of sales, we can determine the contribution margin ratio using the formula Contribution Margin Ratio = 1 - Ratio of Variable Expenses to Sales, which results in a contribution margin ratio of 0.25 (1 - 0.75).

To find the actual sales revenue needed, we apply the formula Sales Revenue = Break-even Sales Revenue / Contribution Margin Ratio. Plugging in the given values, we get Sales Revenue = $840,000 / 0.25 = $3,360,000.