Mack Jacoby sells building supplies. His annual sales equal $450,000. His total fixed costs annually equal $75,000. The cost of goods sold annually is $335,000. Mack works an average of 240 days a year and 8 hours each day. Mack makes an average of five sales calls per day. Mack's break-even volume per hour is approximately:

Question

Quizplus · Accepted Answer

To calculate the break-even volume per hour, first determine the total variable costs and the contribution margin. The cost of goods sold (COGS) is $335,000, which are variable costs. The sales are $450,000. Therefore, the contribution margin is sales minus variable costs, which equals $450,000 - $335,000 = $115,000. The fixed costs are $75,000. The break-even point in dollars is the fixed costs divided by the contribution margin ratio (contribution margin divided by sales). The contribution margin ratio is $115,000 / $450,000 = 0.2556. The break-even point in dollars is $75,000 / 0.2556 = $293,255.20 annually. To find the break-even volume per hour, divide this by the total working hours in a year. Mack works 240 days a year for 8 hours each day, which is 1,920 hours (240 days * 8 hours). Therefore, the break-even volume per hour is $293,255.20 / 1,920 hours = approximately $152.73, which rounds to about $153.00.

Mack Jacoby Sells Building Supplies