Question

Dream Threads Company sells hand-sewn shirts for $40 each and has a contribution margin ratio of 50%. It incurs $7,000 per month of fixed costs. What is its monthly breakeven point in shirts

Answer 1

350 shirts

Step-by-step explanation:

Break even point = Fixed costs / Contribution margin

Given that;

Fixed costs = $7,000

Contribution margin = 50%

Break even point = $7,000 / 50%

= $14,000

Therefore, to determine the Break even point in shirts, you'll divide $14,000 by the sales price per unit

BEP = $14,000 / $40

BEP = 350 shirts

Hence, monthly break even point in shirt is 350 shirts