askme42
Jan 20, 2009, 01:47 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, 03:03 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, 03:36 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:??