Question

Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed cost. The break-even point in sales dollars is: A. $320,000 B. $16,000 C. $32,000 D. $61,740

Answer 1

The break-even point in sales dollars is: C. $32,000

Step-by-step explanation:

During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed cost.

Contribution margin ratio = (Sales - Total Variable cost)/Sales = ($220,000 - $55,000)/$220,000 = 0.75

The break-even point sales dollars is calculated by using following formula:

Break-even point in sales dollars = Fixed cost/Contribution margin ratio = $24,000/0.75 = $32,000