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Company had sales of $400,000 and variable costs of $150,000 and contribution margin of $250,000 and fixed costs of $200,000 and income of $50,000
Company had sales of $400,000 and variable costs of $150,000 and contribution margin of $250,000 and fixed costs of $200,000 and income of $50,000. How much is L Company’s break-even in sales dollars?
Group of answer choices
$350,000
$280,000
$250,000
$200,000
$320,000
Expert Solution
Contribution margin = $250,000
Sales = $400,000
Contribution margin ratio = Contribution margin/ Sales = $250,000/ $400,000 = 0.625
Fixed costs = $200,000
Break even in sales dollars = Fixed Costs/ Contribution margin ratio = $200,000/ 0.625 = $320,000
L Company’s break-even in sales dollars is $320,000.
Answer is e. $320,000
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