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    Information relates to the break-even point at Pezzo Corporation

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    The following information relates to the break-even point at Pezzo Corporation:
    Sales dollars ...................... $120,000
    Total fixed expenses .......... $30,000

    If Pezzo wants to generate net operating income of $12,000, what will its sales dollars have to be?
    A) $132,000
    B) $136,000
    C) $168,000
    D) $176,000

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    Solution Preview

    Dear student,

    Solution is provided in a separate excel file attached in the following parts.Answer (c) $168000 is correct which is proved with working formulas and supporting explanatory notes on conceptual aspects of break even analysis.

    Verification of Break even sales:
    Break even sales $120,000
    Less: Variable cost $90,000
    Contribution margin $30,000
    Fixed cost $30,000
    Net Income (Zero ) Nil

    Contribution margin ratio = 30000/120000 25%

    Break even sales in Dollars ...

    Solution Summary

    The expert examines information related to the break-even point at Pezzo Corporation.