Question

Data concerning Farm Corporation's single product appear below:

Selling price per unit $ 290.00
Variable expense per unit $ 78.30
Fixed expense per month $ 161,330
1. The break-even in monthly dollar sales is closest to __________.

Answer 1

$221,000

Step-by-step explanation:

Breakeven Point is the level of Sales where business has no profit no loss. At this level of sales the business covers all the varible and fixed expenses.

Contribution margin = Selling Price - Variable cost

Contribution margin = $290 - $78.3

Contribution margin = $211.70

Contribution margin Ratio =

Contribution margin Ratio = Contribution margin / Sales

Contribution margin Ratio = $211.70 / $290

Contribution margin Ratio = 0.73 = 73%

Breakeven Point = Fixed Cost / Contribution margin ratio

Breakeven Point = $161,330 / 73%

Breakeven Point = $221,000