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QuadCity Manufacturing, Inc
QuadCity Manufacturing, Inc. reported the following items:
Sales = $8,000,000
Variable Costs of Production = $1,500,000
Variable Selling and Administrative Expenses = $550,000
Fixed Costs = $1,350,000
EBIT = $4,600,000 and the Marginal Tax Rate = 21%.
Calculate the QuadCity's break − even point in sales dollars.
Expert Solution
Computation of the break even point in sales dollars:-
Variable cost = Variable cost of production + Variable selling & administrative expenses
= $1,500,000 + $550,000
= $2,050,000
Contribution margin ratio = (Sales - Variable cost) / Sales
= ($8,000,000 - $2,050,000) / $8,000,000
= $5,950,000 / $8,000,000
= 74.38%
Break even point in sales dollars = Fixed costs / Contribution margin ratio
= $1,350,000 / 74.38%
= $1,815,126.05 Or $1,815,126
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