Answer:
Option A $25000
Explanation:
The breakeven point in sales dollars can be calculated by using the following formula:
Breakeven Sales In Dollars = Fixed Cost / Contribution Margin ratio
The fixed cost here is $14000 and the contribution margin ratio is 0.56.
So by putting the values, we have:
Breakeven Sales In Dollars = $14000 / 0.56 = $25000
So the sales required to breakeven at a contribution margin of 0.56 is $25000. Remember that Fixed cost though remains the same but contribution margin ratio changes when the variable cost or selling price changes. So if the changes in variable cost or selling prices are witnessed to achieve the maximum profit possible, then the managers must recalculate the breakeven point because it has been altered due to these changes.
Answer:
A. $25 comma 000
Explanation:
1. Breakeven Point on sales dollars can be calculated using this equation:
[tex]BEP=\frac{Fixed Costs}{Fixed Costs- Contribution Margin}= \frac{Fixed Costs}{Contribution Margin Ratio}[/tex]
In this case, we know that:
[tex]Fixed Costs=$14,000\\Contribution Margin Ratio= 56\%[/tex]
2. Replacing Values:
[tex]BEP=\frac{\$14,000}{56\%} =\$25,000[/tex]
The company needs to have sales of $25,000 to breakeven at a 56% contribution margin ratio. It means that the company must determine the appropiate strategy to reach the sale level required.
