Palmer Company Below is an income statement for Palmer Company:
Refer to Palmer Company. Based on the cost and revenue structure on the income statement, what was Palmer's break-even point in dollars?

Question

Palmer Company Below is an income statement for Palmer Company:
 Refer to Palmer Company. Based on the cost and revenue structure on the income statement, what was Palmer's break-even point in dollars?

Quizplus · Accepted Answer

The break-even point in dollars can be calculated using the formula: 
Break-even point (in dollars) = Fixed costs / Contribution margin ratio 
From the income statement, we can see that the total fixed costs are $100,000 and the contribution margin ratio is 60% (calculated as (Sales - Variable Costs) / Sales). 
Therefore, Break-even point (in dollars) = $100,000 / 0.60 = $166,667 
So, option D ($290,909) is not correct. 
Therefore, the answer is D, $166,667.

Palmer Company Below Is an Income Statement for Palmer Company