Answered step by step
Verified Expert Solution
Question
1 Approved Answer
This is a solution to a question about calculating net income and break-even point in dollars. Can you help me understand why the solution is
This is a solution to a question about calculating net income and break-even point in dollars. Can you help me understand why the solution is $1,323,721 for break-even? I always thought it was calculated by dividig fixed costs by the contribution margin ratio, but here they seem to be using this formula: X= (TVC Sales)X +FC. Do you know why this might be used or what I might be overlooking?
Solution Broadening Your Perspective 5-2 (Part Level Submission) variable unit cost of goods sold $480,000 240,000 = $2.00: $2.00 + $0.25 Sales volume Total sales $2.25 300,000 units $1,575,000 240,000 125% 300,000 $5.25 Net income computation Sales Variable expenses $1,575,000 Cost of goods sold (300,000 x $2.25) Selling expenses (300,000 $0.48) Administrative expenses (300,000$0.28) $675,000 144,000 84,000 Total varlable expenses 903,000 672,000 Contribution margin Fixed expenses Cost of goods sold Selling expenses Administrative expenses $320,000 165,200 84,000 Total fixed expenses 569,200 Net income $102,800 = ($903,000 $1,575,000)X + $569,200 = 0.57x + $569,200 = $569,200 = $1,323,721 x 0.43x Profits and the break-even point would both increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started