Last year Easton Corporation reported sales of $720,000, a contribution margin ratio of 30% and a net loss of $24,000. Based on this information, the break-even point was:
A)$640,000
B)$880,000
C)$744,000
D)$800,000

Question

Quizplus · Accepted Answer

The break-even point in sales dollars is calculated by dividing the fixed costs by the contribution margin ratio. Since the company reported a net loss of $24,000, this amount represents the fixed costs that were not covered. Therefore, the break-even point is $720,000 (sales) + $24,000 (loss) = $744,000. However, the correct calculation should be $24,000 / 0.30 = $80,000 (fixed costs), then $80,000 / 0.30 = $800,000.

Last Year Easton Corporation Reported Sales of $720,000, a Contribution