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Finding the Break-even Point in Sales Dollars

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Wallace, Inc., prepared the following budgeted data based on a sales forecast of $6,000,000:

Variable Fixed
Direct materials $1,600,000
Direct labor 1,400,000
Factory overhead 600,000 $ 900,000
Selling expenses 240,000 360,000
Administrative expenses 60,000 140,000
Total $3,900,000 $1,400,000

What would be the amount of sales dollars at the break-even point?
A) $2,250,000
B) $3,500,000
C) $4,000,000
D) $5,300,000

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Solution Preview

The formula to find the break-even point in sales dollars is:

Break-even point in sales dollars=Fixed Costs/Contribution Margin Ratio
Contribution Margin Ratio=Contribution Margin/Sales Revenues
Contribution Margin Ratio=(Sales Revenues-Variable Costs)/Sales ...

Solution Summary

This solution discusses cost-volume-profit relationships in great depth and illustrates how to find the break-even point in sales dollars.