Question

Pharoah Corp. had total variable costs of $179,400, total fixed costs of $74,400, and total revenues of $260,000. Compute the required sales in dollars to break even.

Answer 1

Answer:

$165,333.33

Explanation:

The computation of the required sales in dollars to break even is as follow:

Break even point in dollars = Fixed cost ÷ contribution margin ratio

where,

Contribution margin ratio is

= (Sales - variable cost) ÷ (Sales)

= ($260,000 - $179,400) ÷ ($179,400)

= 45%

Now the break even point in dollar is

= $74,400 ÷ 0.45

= $165,333.33