Last month Empire Company had a $40,850 profit on sales of $301,000. Fixed costs are $88,580...

Last month Empire Company had a $40,850 profit on sales of $301,000. Fixed costs are $88,580 a month. By how much would sales be able to decrease for Empire to still break even?

A. $95,000

B. $341,850

C. $206,000

D. $129,430

Solutions

Expert Solution

Contribution Margin = Fixed Expenses + Profit

= $88,580 + $40,850 = $129,430

Variable Expenses = Sales - Contribution Margin

= $3,01,000 - $1,29,430 = $171,570

	Total $
Sales	3,01,000.00
Less: Variable Expenses	1,71,570.00
Contribution Margin	1,29,430.00
Fixed Expenses	88,580.00
Profit	40,850.00

Profit Volume Ratio = Contribution Margin / Sales = $1,29,430 / $3,01,000 = 0.43 or 43%

Break Even Sales = Fixed Cost / PV Ratio = $88,580 / 0.43 = $206,000

Therefore, the correct option is Option C: $206,000

ekkarill92 answered 4 months ago

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