Garcia Veterinary Clinic expects the following operating results next year: What is Garcia's break-even point next year in sales dollars?

Question

Garcia Veterinary Clinic expects the following operating results next year:  What is Garcia's break-even point next year in sales dollars?

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $600, 000 - $120, 000 = $480, 000
CM ratio = Contribution margin ÷ Sales
= $480, 000 ÷ $600, 000 = 0.8
Dollar sales to break even = Fixed expenses ÷ CM ratio
= $300, 000 ÷ 0.8 = $375, 000

Garcia Veterinary Clinic Expects the Following Operating Results Next Year