Answer (A) is correct . The breakeven point in dollars equals total fixed costs divided by the contribution margin ratio. This firm’s CMR is 30% ($4,000,000 = $1,200,000 ÷ .30), so each additional sales dollar contributes $0.30 toward profit.
Answer (B) is incorrect because When substituted into the original breakeven formula, it would not have produced a breakeven level of $4 million.
Answer (C) is incorrect because When substituted into the original breakeven formula, it would not have produced a breakeven level of $4 million.
Answer (D) is incorrect because When substituted into the original breakeven formula, it would not have produced a breakeven level of $4 million.
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