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