Question

Blythe Company has provided the following​ information: Sales price per unit ​$40 Variable cost per unit 18 Fixed costs per month ​12,800 What is the amount of sales in dollars required for Blythe to break​ even? (Round any percentages to two decimal places and your final answer to the nearest​ dollar.)

Answer 1

Break-even sales in dollars = $23,273

Step-by-step explanation:

The break-even point is the selling price at which the selling price, equals the cost of production. no profit is made, but no loss is incurred too.

we will use the formula for calculating required selling price, to calculate the break-even price as follows:

Required selling price = (Fixed costs + Target profit) ÷ (Contribution margin ratio)

Contribution margin ratio = Contribution margin ÷ net sales revenue

Contribution margin = sales price - variable cost

contribution margin = 40 - 18 = $22

Net sales revenue = $40

∴ contribution margin ratio = (Contribution margin ÷ net sales revenue) × 100

= 22 ÷ 40 = 55.00% = 0.55

∴ Required selling price = (Fixed costs + Target profit) ÷ (Contribution margin ratio)

Required selling price = (12,800 + 0) ÷ 55.00%

= 12,800 ÷ 0.55 = 23,272.7 = 23,273 (to the nearest dollars)

Break-even sales in dollars = $23,273