Niagara Winery has fixed costs of $10,000 per year.Its warehouse sells wine with a contribution margin of 20%.How much in sales does Sonoma need to break even per year if wine is its only product?

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Quizplus · Accepted Answer

To break even, Niagara Winery needs to cover its fixed costs with the contribution margin. The contribution margin is 20%, meaning for every dollar of sales, $0.20 goes towards covering fixed costs. To find the break-even point in sales, divide the fixed costs by the contribution margin rate: $10,000 / 0.20 = $50,000.

Niagara Winery Has Fixed Costs of $10,000 Per Year