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askme42
Jan 20, 2009, 12:47 PM
Company X is selling 400,000 units for $1.50 each.

The contribution margin ratio is 20%.

If Company X will break even at this level of sales, what is their fixed costs?
asastring
Jan 20, 2009, 02:03 PM
The Total Contribution Margin (TCM) is Total Revenue (TR, or Sales) minus Total Variable Cost (TVC):

TCM = TR − TVC

20% equals $600,000 - x or variable cost.

VC equals $600,000 - 20%
VC equals $120,000
FC equals $480,000
askme42
Jan 20, 2009, 02:36 PM
What I got was different ...

Using the formula

Total revenues at breakeven = fixed expenses / contribution margin

600,000 = x / 0.2

600,000 * 0.2 = X

the answer I got was 120,000

??? :eek: :confused: :eek: ???