32. You can also calculate the amount of sales revenue to break even by dividing

Question

32. You can also calculate the amount of sales revenue to break even by dividing total fixed costs by total contribution margin ratio. So, if FC are 1,000,000 and the combined (total) CM ratio is 33%, then BE sale is 33. A decrease in sales price, with no changes in costs, will result in a CM/unit, which will cause the volume needed to break even (or achieve a target profit) to than it was before the price change. So units need to be sold to reach the same financial goals. The opposite is also true 34. Managers can quickly forecast the expected increase or decline in operating income from changing sales price or volume by multiplying the newby the expected 35. An increase in variable cost, with no change in sales price, will result in a CM/unit, which will cause the volume needed to break even (or achieve a target profit) to than it was before the change in cost. So units need to be sold to reach the same financial goals. The opposite is also true.

Explanation / Answer

Solution:

32)

Fixed Cost = 1,000,000

CM Ratio = 33% or 0.33

BE Sale = Fixed Cost 1,000,000 / 0.33 = 3,030,303.03

33)

A decrease in sales price, with no changes in costs, will result in a DECREASE CM/Unit, which will cause the volume needed to break even (or achieve a target profit) to be HIGHER that it was before the price change. So HIGHER units to be sold to reach the same financial goals. The opposite is also true.

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