Calculate the break-even level of sales, assuming: $1.4 million fixed costs, $400,000 depreciation expense, and variable costs-to-sales ratio of 65 percent.(use the values in dollar)
A)$2,769,231
B)$2,857,143
C)$4,000,000
D)$5,142,857

Question

Quizplus · Accepted Answer

The break-even level of sales is calculated by dividing the total fixed costs (including depreciation) by the contribution margin ratio (1 - variable cost ratio). Total fixed costs are $1.4 million + $400,000 = $1.8 million. The contribution margin ratio is 1 - 0.65 = 0.35. Therefore, the break-even sales level is $1.8 million / 0.35 = $5,142,857.

Calculate the Break-Even Level of Sales, Assuming: $1