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.
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). Here, the total fixed costs are $1.4 million + $400,000 = $1.8 million, and the contribution margin ratio is 1 - 0.65 = 0.35. Thus, the break-even sales = $1.8 million / 0.35 = $5,142,857.

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