Calculate the break-even level of sales, assuming: $1.4 million fixed costs, $400,000 depreciation expense, and variable costs-to-sales ratio of 65 percent.
A)$2,769,231
B)$2,857,143
C)$4,000,000
D)$5,142,857 Break-even sales =

Question

Quizplus · Accepted Answer

The break-even sales level is calculated by dividing the total fixed costs (including depreciation) by the contribution margin ratio (1 - variable cost ratio). Here, the total fixed costs are $1.4 million + $400,000 = $1.8 million, and the contribution margin ratio is 1 - 0.65 = 0.35. Thus, break-even sales = $1.8 million / 0.35 = $5,142,857.

Calculate the Break-Even Level of Sales, Assuming: $1