Question

Last year, Courtney Company reported sales of $640,000, a contribution margin of $160,000, and an operating loss of ($40,000). Based on this information, how much sales revenue did the company need to generate in order to break-even?

Answer 1

Break-even sales = $800,000.

Step-by-step explanation:

The beak-even point is the units of products to be sold or number of customers to be served to enable a business to cover exactly its total cost from the revenue. At the break-even point, the business makes no profit or no loss because the contribution from sales exactly equals the total fixed cost

Break-even in sales revenue = Total fixed cost/Contribution margin

Contribution margin (%) = Contribution/ sales × 100

= 160,000/640,000

= 0.25 × 100

= 25%

Fixed cost = Contribution - operating income

= 160,000- -( 40,000)

= 160,000 + 40,000

= 200,000

Break-even point sales = 200,000/25%

= $800,000.