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HI John,PLease could i get some help on this, just cant seem to get to an answer.
Purple Company wants to know the breakeven point of its sales revenue. The fixed costs at Purple Company are $1,200,000. The variable costs are incurred at 52% of sales up to a production level of 1.25m. When production exceeds this level, the variable costs for incremental units is 49% of sales.
Calculate Purple Company’s breakeven point in sales revenue to the nearest $1,000
A 2,353 B 2,426 C 1,273 D 1,800
For breakeven the contribution must equal 1,200,000.
At sales of 1,250,000, the contribution is 1,250,000 x 48% = 600,000.
Therefore for breakeven they need an extra 600,000 contribution.An extra contribution of 600,000 means they need extra sales of 600,000 / 0.51 = 1,176,471.
Therefore total sales revenue for breakeven must be 1,250,000 + 1,176,471 = 2,426 to the nearest thousand.
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