Question
A company sells a single product at $50 per unit. The company has budgeted to sell 600,000 units in the coming year. The company's budgeted
A company sells a single product at $50 per unit. The company has budgeted to sell 600,000 units in the coming year. The company's budgeted income statement for the coming year is as follows:
Sales ($50 x 600,000) $30,000,000
Cost of sales 20,000,000
Gross profit $10,000,000
Selling, general and administrative expenses 7,500,000
Operating income 2,500,000
Cost of sales consists of 75% variable cost and 25% fixed cost. Sales, general, and administrative expenses are 40% variable cost and 60% fixed cost. Management wants to know how low sales volume can go without the company having an operating loss. What is the company's breakeven point in revenue?
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