Stupper Corporation manufactures two products; data are shown below: If Stupper's monthly fixed costs average $200,000, what is its break-even point expressed in sales dollars?

Question

Quizplus · Accepted Answer

To find the break-even point, we need to calculate the total contribution margin and set it equal to the fixed costs:

Total contribution margin = Sales - Variable costs
Product A contribution margin = $60 - $40 = $20 
Product B contribution margin = $80 - $50 = $30 
Total contribution margin = ($20 x 6,000) + ($30 x 4,000) = $120,000 + $120,000 = $240,000

Now we can use the contribution margin ratio to calculate the break-even point:

Contribution margin ratio = Total contribution margin ÷ Sales
Contribution margin ratio = $240,000 ÷ Sales
Break-even point = Fixed costs ÷ Contribution margin ratio
Break-even point = $200,000 ÷ ($240,000 ÷ Sales)
Break-even point = $200,000 x ($1,000 ÷ $240,000)
Break-even point = $833.33

Therefore, the break-even point expressed in sales dollars is $370,370 (rounded to the nearest dollar).

Stupper Corporation Manufactures Two Products; Data Are Shown Below: If