Question

Burton Snowboards reported the following figures last week for its Custom V Rocker Snowboard:Sales $70,000 Total Fixed Costs $19,000 Total Variable Costs $35,000 Total Costs $54,000 Net Income $16,000 If the above numbers represent 70% operational capacity, express the weekly break-even point in dollars as a percentage of maximum capacity.

Answer 1

The break-even point for Burton Snowboards at 70% operational capacity is $38,000 in sales dollars. Expressed as a percentage of maximum capacity, the break-even point is 38% of the maximum sales capacity.

Step-by-step explanation:

Firstly, let's calculate the break-even point for Burton Snowboards at 70% operational capacity. The break-even point is where total revenue equals total costs, resulting in a net income of $0. At 70% capacity, the company's total costs are $54,000. Since fixed costs remain constant, they are $19,000, and the rest ($54,000 - $19,000 = $35,000) are variable costs. To find the break-even point in sales dollars, we use the formula:

Total Fixed Costs ⁄ (Sales - Total Variable Costs).

At break-even, Sales = Total Variable Costs + Total Fixed Costs. Therefore, using the numbers given, we would have $19,000 ⁄ ($70,000 - $35,000) = $19,000 ⁄ $35,000. This simplifies to $19,000 ⁄ 0.5 = $38,000 which is the break-even point in sales dollars at 70% capacity.

To express this as a percentage of maximum capacity, we calculate $38,000 as a percentage of the full capacity sales figure. If $70,000 represents 70% capacity, 100% capacity in sales dollars would be $70,000 ⁄ 0.7 = $100,000. Therefore, the break-even point as a percentage of maximum capacity is $38,000 ⁄ $100,000 = 38%.