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Sarah and Matthew Company Income Statement For the Year Ended December 31, 2020 Sales (297
Sarah and Matthew Company Income Statement For the Year Ended December 31, 2020
Sales (297.600 units) Cost of goods sold Gross profit Operating expenses Selling $372,000 Administrative 189,100
Net loss
$1,488.000 992.000
496.000
561:1100:
A cost behavior analysis indicates that 75% of .lie cos: of goods sold are variable and 40% of the selling expenses are variable. Administrative exp6nses 6i-e.$11,1.7CC' fixed. 0 OA
' 27'1 Advisory " C.1 at 4, ENG
calculate Break-even Point in Units and Dollars:
Expert Solution
Break-even Point in Dollars = Fixed Cost / Contribution Margin Ratio
Here,
Variable cost = 992,000*75% + 372,000*40% + (189100-114700) = 967,200
Fixed cost = 992000*25%+372000*60%+114700 = 585,900
Contribution Margin Ratio = (Sales - Variable Cost)/Sales
= (1488000-967200)/1488000
= 35%
Break-even Point in Dollars = $585,900/35% = 1,674,000
Break-even Point in Units = 1,674,000/1488000*297,600 = 334,800 units
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