Question

Break-Even Sales Dollars for a Multiple-Product Firm Chillmax Company now sells both pairs of shoes and carryalls. Next year, Chillmax expects to produce total revenue of $210,000 and incur total variable cost of $81,375. Total fixed cost is expected to be $91,500. Required: 1. Calculate the break-even point in sales dollars for Chillmax. Note: Round the contribution margin ratio to four decimal places and sales to the nearest dollar.

Answer 1

Break even point in dollars $1749,388

Step-by-step explanation:

first we solve for the contribtion margin which sales less variable cost.

`Sales \: Revenue - Variable \: Cost = Contribution \: Margin`

210,000 - 81,375 = 128,625

now we divide this by sales to get the contribution margin ratio

which represent the amount after variable cost per dollar of sales available to afford fixed cost and make a gain

`(Contribution \: Margin)/(Sales \: Revenue) = Contribution \: Margin \: Ratio`

128,625 / 210,000 = 0.6125

Now we divide our fixed cost by how much each dollar of sales provides to know at which level we pay up the fixed cost:

`(Fixed\:Cost)/(Contribution \:Margin \:Ratio) = Break\: Even\: Point_(dollars)`

91,500 / 0.6125 = 149,387.7551