Question

Roberts Produce Company has fixed costs of $14,000. The company's contribution margin ratio is 46%, and the ratio of selling revenue to sales is 20%. What is the breakeven point in sales dollars? (Round your answer to the nearest dollar.)

A) $70,000
B) $30,435
C) $6,440
D) $2,800

Answer 1

To find the breakeven point in sales dollars, calculate the breakeven sales quantity first using the contribution margin ratio and the ratio of selling revenue to sales. Then, multiply the breakeven sales quantity by the selling price per unit to find the breakeven point in sales dollars.

Step-by-step explanation:

To find the breakeven point in sales dollars, we need to calculate the breakeven sales quantity first. The contribution margin ratio is given as 46%, which means that for every dollar in sales, 46 cents contribute to covering the fixed costs and generating profit. The ratio of selling revenue to sales is 20%, which means that for every dollar in sales, 20 cents represent revenue.

Using these ratios, we can set up the following equation to find the breakeven sales quantity: 0.46Q = $14,000, where Q is the sales quantity we want to find. Solving for Q, we get: Q = $14,000 / 0.46 ≈ $30,435. To find the breakeven point in sales dollars, we multiply the breakeven sales quantity by the selling price per unit: $30,435 * $1 = $30,435. Therefore, the breakeven point in sales dollars is approximately $30,435.