Question

Last year Easton Corporation reported sales of $810,000, a contribution margin ratio of 40% and a net loss of $33,000. Based on this information, the break-even point was:

a. $843,000

b. $727,500

c. $892,500

d. $975,000

Answer 1

Correct option is C

$892,500

Step-by-step explanation:

Profit = (CM ratio × Sales) − Fixed expenses

−$33,000 = (0.40 × $810,000) − Fixed expenses

Fixed expenses = (0.40 × $810,000) + $33,000 = $357,000

Dollar sales to break even = Fixed expenses ÷ CM ratio

= $357,000 ÷ 0.40 = $892,500