Question

Two companies, Ghost and Phantom manufacture similar printer color cartridges. The following data for the two companies for the year 2020 are provided below:

Ghost ($) Phantom ($)
Sales revenue 90,000 108,000
Total costs 63,000 72,000
Variable Costs 40 % of sales revenue 40%

Answer 1

Based on the sales revenue for each company, the breakeven point in dollars are:

• Ghost - $45,000.
• Phantom - $48,000

What is the breakeven point in dollars for Ghost?

This can be found by the formula:

= Fixed costs / Contribution margin ratio

The fixed costs are:

= Total costs - (Sales revenue x Variable cost percentage)

= 63,000 - (90,000 x 40%)

= $27,000

Breakeven point:

= Fixed cost / (( Sales revenue x (1 - 40%)) / Sales revenue)

= 27,000 / ((90,000 x ( 1 - 40%)) / 90,000)

= $45,000

What is the breakeven point for Phantom?

= Fixed cost / (( Sales revenue x (1 - 40%)) / Sales revenue)

= (Total costs - (Sales revenue x Variable cost percentage)) / (( Sales revenue x (1 - 40%)) / Sales revenue)

= (72,000 - (108,000 x 40%)) / ((108,000 x (1 - 40%)) / Sales revenue)

= 28,800 / 0.6

= $48,000

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