Maruca Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The break-even point in dollar sales is closest to:

Question

Maruca Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.  The break-even point in dollar sales is closest to:

Quizplus · Accepted Answer

The break-even point in dollar sales can be calculated as follows:
Break-even point = (Fixed expenses) / (Contribution margin ratio)
Contribution margin ratio = (Total sales - Variable expenses) / Total sales
From the given information,
Total sales = $600,000
Variable expenses = $336,000
Contribution margin = ($600,000 - $336,000) = $264,000
Contribution margin ratio = ($264,000 / $600,000) = 0.44
Fixed expenses = $88,000 + $54,000 + $36,000 = $178,000
Break-even point = ($178,000) / (0.44) = $405,000
Hence, the closest break-even point in dollar sales is option C) $246,000.

Maruca Corporation Has Provided the Following Contribution Format Income Statement