Question

The following information is provided for Company Z. Per Unit Total $ % Sales Revenue (1,500 Units) $25.00 $37,500 100% Variable Costs 10.00 15,000 40 Contribution Margin 15.00 22,500 60 Fixed Costs 10.00 15,000 Net Income 5.00 7,500 What is the Breakeven Point in Dollars?

Answer 1

The Breakeven point in Dollars is $25,000

Breakeven point in Dollars is computed as;

= Fixed cost / Contribution margin ratio

First, we need to compute the contribution margin ratio

= Contribution margin  / Revenues

= $22,500 / $37,500

= 0.6%

Then,

Breakeven point in Dollars

= Fixed cost / Contribution margin ratio

= $15,000 / 0.6%

= $25,000

Therefore, Company Z Breakeven Point in Dollars is $25,000

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