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The manager of Dukey’s Shoe Station estimates operating costs for the year will include $360,000 in fixed costs.
Required:
a. Find the break-even point in sales dollars with a contribution margin ratio of 40 percent.
b. Find the break-even point in sales dollars with a contribution margin ratio of 25 percent.
c. Find the sales dollars required to generate a profit of $100,000 for the year assuming a contribution margin ratio of 40 percent.

Respuesta :

Answer:

(a) $900,000

(b) $1,440,000

(c) $1,150,000

Explanation:

a) Break-even point($):

= Fixed cost ÷ Contribution Margin ratio

= $360,000 ÷ 0.40

= $900,000

b)Break-even point($):

= Fixed cost ÷ Contribution Margin ratio

= $360,000 ÷ 0.25

= $1,440,000

C)Target sales ($):

= [Fixed cost + desired profit ] ÷ Contribution Margin ratio

= [$360,000 + $100,000] ÷ 0.40

= $ 1,150,000

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