Question

Marla’s Publishing Service has $4,800 of fixed expenses. The manager reported the company’s operating income as $0, and the contribution margin was 45%. What are the company's sales in dollars, rounding to the nearest dollar, using the shortcut approach to the contribution margin ratio?

Answer 1

Break-even sales in dollar value = $10,667

Step-by-step explanation:

Since the company's operating income is $0, the company makes no profit and no loss. Therefore, the company's total sales is equal to total expenses. It means the company is in break-even point. However, as the variable expense is not given, we have to use contribution margin ratio to calculate the break-even sales.

We know,

Break-even sales in dollar value = Fixed expenses ÷ Contribution margin ratio

Given,

Contribution margin ratio = 45%

Fixed expenses = $4,800

Putting the values into the above formula, we can get,

Break-even sales in dollar value = $4,800 ÷ 45%

Break-even sales in dollar value = $10,667