Mason Enterprises has prepared the following budget for the month of July: Assuming that total fixed expenses will be $150,000 and the sales mix remains constant, the break-even point would be closest to:

Question

Mason Enterprises has prepared the following budget for the month of July:  Assuming that total fixed expenses will be $150,000 and the sales mix remains constant, the break-even point would be closest to:

Quizplus · Accepted Answer

Using the formula for break-even point:
Break-even point = Fixed expenses / Contribution margin ratio
Contribution margin ratio = Total contribution margin / Total sales
Total contribution margin = (600 x $50) + (400 x $80) + (200 x $160) = $55,000
Total sales = (600 x $100) + (400 x $130) + (200 x $200) = $110,000
Contribution margin ratio = $55,000 / $110,000 = 0.5
Break-even point = $150,000 / 0.5 = $300,000
The closest option to $300,000 is C ($294,545).

Mason Enterprises Has Prepared the Following Budget for the Month