What is the break-even level of revenues for a firm with $6 million in sales, variable costs of $3.9 million, fixed costs of $1.2 million, and depreciation of $1 million?
A)$3,428,571
B)$6,100,000
C)$6,285,700
D)$6,557,377 Variable costs =

Question

Quizplus · Accepted Answer

Total costs = Variable costs + Fixed costs + Depreciation
Total costs = $3.9 million + $1.2 million + $1 million
Total costs = $6.1 million

Break-even level of revenues = Total costs / Contribution margin ratio
Contribution margin ratio = (Sales - Variable costs) / Sales
Contribution margin ratio = ($6 million - $3.9 million) / $6 million
Contribution margin ratio = 0.35

Break-even level of revenues = $6.1 million / 0.35
Break-even level of revenues = $17.428.571

Therefore, the break-even level of revenues for the firm is $6,285,700. So, the correct answer is (C).

What Is the Break-Even Level of Revenues for a Firm