A company has total fixed costs of $180,000 and a contribution margin ratio of 30%.How much sales are necessary to break even?
A)$540,000
B)$600,000
C)$54,000
D)$126,000

Question

Quizplus · Accepted Answer

The formula for calculating the break-even point in sales is:
Break-even point (in units) = Fixed costs ÷ Contribution margin per unit
Break-even point (in dollars) = Fixed costs ÷ Contribution margin ratio
Using the information given in the question, we can calculate the break-even sales as follows:
Break-even point (in dollars) = $180,000 ÷ 0.3
Break-even point (in dollars) = $600,000
Therefore, the company needs to generate $600,000 in sales to break even. The correct answer is B.

A Company Has Total Fixed Costs of $180,000 and a Contribution