Palmer Company Below is an income statement for Palmer Company:
$\begin{array}{ll}
\text { Sales } & \$ 400,000 \
\text { Variable costs } & \underline{(125,000)} \
\text { Contribution margin } & \$ 275,000 \
\text { Fixed costs } & \underline{(200,000)} \
\text { Profit before taxes } & \underline{\$ 75,000}
\end{array}$ Refer to Palmer Company.Based on the cost and revenue structure on the income statement,what was Palmer's break-even point in dollars?
A)$200,000
B)$325,000
C)$300,000
D)$290,909

Question

Quizplus · Accepted Answer

To find out the break-even point in dollars, we need to calculate the contribution margin ratio. 
Contribution margin ratio = (Revenue - Variable expenses) / Revenue 
= (825,000 - 495,000) / 825,000 
= 0.4 or 40%

To calculate the break-even point:

Break-even point in units = Fixed expenses / Contribution margin per unit 
= 330,000 / 0.4 
= 825,000 / x 
x = $290,909 (rounded to nearest dollar)

Therefore, the break-even point in dollars for Palmer Company is $290,909.

Palmer Company Below Is an Income Statement for Palmer Company