QuadCity Manufacturing, Inc. reported the following items: Sales = $6,000,000; Variable Costs of Production = $1,500,000; Variable Selling and Administrative Expenses = $550,000; Fixed Costs = $1,350,000; EBIT = $2,600,000; and the Marginal Tax Rate = 35%. QuadCity's breakminus even point in sales dollars is

A) $2,050,633.
B) $2,197,500.
C) $2,438,750.
D) $2,785,000.

Question

contestada

Respuesta :

stokholm stokholm · Answer 1 · 2019-08-19T12:57:26+02:00

Answer:

Correct option is A) $2,050,633

Explanation:

Break even Point in dollars = [tex]\frac{Fixed\: Cost}{Contribtuion \: margin}[/tex]

Here, fixed cost = $1,350,000

Contribution margin = [tex]\frac{Contribution}{sales} \times 100[/tex]

Contribution = Sales - Variable Cost

Sales = $6,000,000

Variable cost = $1,500,000

Variable Selling & Administration = $550,000

Contribution = $6,000,000 - $1,500,000 - $550,000 = $3,950,000

Contribution margin = [tex]\frac{3,950,000}{6,000,000} \times 100[/tex] = 65.83%

Break Even Point in dollars = [tex]\frac{1,350,000}{0.6583}[/tex] = $2,050,633.

Thus correct option is A) $2,050,633