Question

Last month Dexter Company had a $11,780 loss on sales of $164,000. Fixed costs are $62,620 a month. By how much do sales have to increase for Dexter to break even

Answer 1

$38,000

Step-by-step explanation:

Calculation for how much do sales have to increase for Dexter to break even

First step is to find the contribution margin ratio

Contribution margin ratio = ($62,620 - $11,780)/$164,000 = 30%

Contribution margin ratio =$50,840/$164,000

Contribution margin ratio=31%

Second step is to find the Break even sales Break even sales=$62,620/0.31

Break even sales=$202,000

Last step is to find the increase in sales

Sales must increase =$202,000 - $164,000

Sales must increase = $38,000

Therefore the amount that sales have to increase for Dexter to break even will be $38,000