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    askme42 Posts: 18, Reputation: 1
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    #1

    Jan 20, 2009, 01:47 PM
    Calculate Fixed Costs
    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's Avatar
    asastring Posts: 13, Reputation: 3
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    #2

    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's Avatar
    askme42 Posts: 18, Reputation: 1
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    #3

    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:??
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