Question

In: Accounting

Presented below are variable costing income statements for Diggs Company and Doggs Company. They are in...

Presented below are variable costing income statements for Diggs Company and Doggs Company. They are in the same industry, with the same net incomes, but different cost structures.

Diggs Co.

Doggs Co.
Sales $195,000 $195,000
Variable costs 97,500 48,750
Contribution margin 97,500 146,250
Fixed costs 52,500 101,250
Net income $45,000 $45,000


(a1)

Compute the break-even point in dollars for each company.

Diggs Co.

Doggs Co.
Break-even point

$Enter a dollar amount

$Enter a dollar amount

Solutions

Expert Solution

Breakeven point in sales dollar = Fixed cost/Contribution margin ratio

                                                 = Fixed cost/ (Contribution margin/Sales)

Breakeven point in sales dollar for Diggs Co. = $ 52,500/ ($ 97,500/ $ 195,000)

= $ 52,500/0.5

                                                                    = $ 105,000

Breakeven point in sales dollar for Doggs Co. = $ 101,250/ ($ 146,250/ $ 195,000)

                                                                         = $ 101,250/0.75

                                                                    = $ 135,000

ekkarill92 answered 1 year ago
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