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A company has a fixed cost of $50,000 and a contribution margin ratio of 40%. What is the breakeven point in dollars?  A. $125,000  B. $100,000  C. $75,000  D. $62,500

Question

A company has a fixed cost of 50,000andacontributionmarginratioof4050,000 and a contribution margin ratio of 40%. What is the breakeven point in dollars?  A. 125,000  B. 100,000 C.100,000  C. 75,000  D. $62,500

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Solution

The breakeven point in dollars can be calculated by dividing the fixed costs by the contribution margin ratio.

Here's the step-by-step calculation:

  1. Convert the contribution margin ratio into decimal form. In this case, 40% becomes 0.40.

  2. Divide the fixed costs by the contribution margin ratio.

So, 50,000/0.40=50,000 / 0.40 = 125,000

Therefore, the breakeven point in dollars is 125,000.So,theanswerisA.125,000. So, the answer is A. 125,000.

This problem has been solved

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