Lake Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and operating profits were $180,000.
-What is Lake's break-even sales volume?
A) $660,000.
B) $1,540,000.
C) $1,600,000.
D) $2,020,000.

Question

Lake Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and operating profits were $180,000. 
-What is Lake's break-even sales volume?
A) $660,000.
B) $1,540,000.
C) $1,600,000.
D) $2,020,000.

Quizplus · Accepted Answer

The break-even sales volume is calculated by dividing fixed costs by the contribution margin ratio. First, calculate fixed costs: Contribution Margin = Sales x Contribution Margin Ratio = $2,200,000 x 30% = $660,000. Operating Profit = Contribution Margin - Fixed Costs, so Fixed Costs = Contribution Margin - Operating Profit = $660,000 - $180,000 = $480,000. Break-even sales = Fixed Costs / Contribution Margin Ratio = $480,000 / 0.30 = $1,600,000.

Lake Sales Had $2,200,000 in Sales Last Month