EM Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and operating...

Question:

EM Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and operating profits were $180,000.

What is EM's break-even sales volume?

a. $660,000

b. $2,020,000

c. $1,540,000

d. $1,600,000

Break-Even Point:

The break-even point can also be called the zero-profit point, as it represents the sales revenue point where all costs are covered but no profit is generated. Knowing the break-even point is vital for all business owners. Sales beyond the break-even point earn profits for the business whereas a company incurs a loss when its sales volume is below the break-even point.

Answer and Explanation: 1

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Sales $2,200,000
Contribution margin ratio 30%
Contribution margin $660,000
Operating profits $180,000
Fixed cost $480,000
($660,000 - $180,000)
Br...

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How to Calculate the Break-Even Point - Definition & Formula

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Chapter 5 / Lesson 28
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See how to calculate break-even point (in units and dollars). See the variables of the break-even point formula and examples. Understand the purpose of break-even analysis.


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