Answer (B) is correct . Fixed costs total $350,000 ($100,000 overhead + $250,000 SG&A). Variable costs total $675,000. Given sales of $1,500,000, the contribution margin is $825,000 ($1,500,000 – $675,000). Thus, the contribution margin percentage is 55% ($825,000 ÷ $1,500,000). Dividing the $350,000 of fixed costs by 55% produces a breakeven point of $636,363.64.
Answer (A) is incorrect because This amount does not even cover fixed costs. Answer (C) is incorrect because This amount of sales results in a small profit. Answer (D) is incorrect because This amount does not cover the $350,000 of fixed costs.
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