In 2017, Craylon Company has sales of P1,000,000, variable costs of P250,000, and fixed costs of P255,000

Accounting Nov 16, 2020

In 2017, Craylon Company has sales of P1,000,000, variable costs of P250,000, and fixed costs of P255,000. In 2018, the company expects annual property taxes to decrease by P15,000

Calculate the breakeven point (in peso) for 2018.

Expert Solution

New Fixed Cost = Old Fixed Cost - Property Tax

=P255,000 - P15,000

=P240,000

Contribition Margin Ratio = (Sales - Variable Cost) / Sales × 100

=(P1,000,000 - P250,000)/P1,000,000

=P750,000/P1,000,000 × 100

=75%

Break even Point = New Fixed Cost / Contribution margin ratio

=P240,000/75%

=P320,000

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