Question

Livingston Co. has fixed costs of $60,000 and a contribution margin ratio of 30%. To break even, Livingston Co. needs ________ in dollar sales.

A) $18,000
B) $80,000
C) $200,000
D) $300,000

Answer 1

To break even, Livingston Co. needs $200,000 in dollar sales.

Step-by-step explanation:

To break even, Livingston Co. needs to generate enough sales to cover its fixed costs and contribute towards its variable costs. The contribution margin ratio is the percentage of each sales dollar that is available to cover fixed costs and provide a contribution towards profits. In this case, the contribution margin ratio is 30%.

To calculate the break-even point in dollar sales, we can use the formula:

Break-even point (in dollar sales) = Fixed Costs / Contribution Margin Ratio

Substituting the given values, we have:

Break-even point (in dollar sales) = $60,000 / 30% = $200,000

Therefore, to break even, Livingston Co. needs $200,000 in dollar sales.