Chillmax Company now sells both pairs of shoes and carryalls

Accounting Aug 21, 2020

Chillmax Company now sells both pairs of shoes and carryalls. Next year, Chillmax expects to produce total revenue of $210,000 and incur total variable cost of $81,375. Total fixed cost is expected to be $91,500. Required: Calculate the break-even point in sales dollars for Chillmax. ( Note: Round the contribution margin ratio to four decimal places and sales to the nearest dollar.)

Expert Solution

Computation of the break even point in sales dollars:-

Contribution margin = Total sales revenue - Total variable cost

= $210,000 - $81,375

= $128,625

Contribution margin ratio = Contribution margin / Total sales revenue

= $128,625 / $210,000

= 0.6125

Break even point in sales dollars = Total fixed cost / Contribution margin ratio

= $91,500 / 0.6125

= $149,387.76 Or $149,388

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