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    maandpa1227's Avatar
    maandpa1227 Posts: 17, Reputation: 1
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    #1

    Aug 26, 2007, 09:22 AM
    Break Even Sales Reven
    The company has a variable cost ratio of 65% and monthly fixed costs of $91,000. What is the company's break-even point in terms of sales dollars?

    I say:

    91,000 / 0.65 = $140,000
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Aug 26, 2007, 02:26 PM
    The company has a variable cost ratio of 65% and monthly fixed costs of $91,000. What is the company's break-even point in terms of sales dollars?

    FC / CM Percentage

    THE CM percentage in this case would be 35%. If you have 100% at sales, less 65% for VC, that leaves the remaining 35% as the contribution margin (CM)

    91,000 / 0.35 = 260,000

    We can also verify the numbers as well if we want:

    If Sales are 260,000
    VC should be 65% of that, so 169,000

    That would leave us with a CM of 91,000 (which makes up the remaining 35% of Sales), Plus, if we take off the 91,000 in Fixed Costs, we have a 0 Net Income.
    maandpa1227's Avatar
    maandpa1227 Posts: 17, Reputation: 1
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    #3

    Aug 26, 2007, 04:08 PM
    Quote Originally Posted by CaptainForest
    The company has a variable cost ratio of 65% and monthly fixed costs of $91,000. What is the company's break-even point in terms of sales dollars?

    FC / CM Percentage

    THE CM percentage in this case would be 35%. If you have 100% at sales, less 65% for VC, that leaves the remaining 35% as the contribution margin (CM)

    91,000 / 0.35 = 260,000

    We can also verify the numbers as well if we want:

    If Sales are 260,000
    VC should be 65% of that, so 169,000

    That would leave us with a CM of 91,000 (which makes up the remaining 35% of Sales), Plus, if we take off the 91,000 in Fixed Costs, we have a 0 Net Income.

    Thanks again. The CM percentage is figured based on 100% which is a factor I did not understand.
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #4

    Aug 26, 2007, 04:15 PM
    You're welcome
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