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Breakeven Sales Revenue

AAnnaSupporter6y ago
Please can you advise on BPP exam kit question 93 Fixed Costs is $1,300,000 Variable costs are 55% of Sales if sales are $1,5 million, but at higher volumes of production and sales, the variable cost for incremental production is 52% What is Breakeven point in Sales revenue? Contribution is 45% - $675,000 This leaves $625,000 to cover of Fixed costs. The answer in the exam kit states that we should divide $625,000 by 0,48 (which I assume proportion of $625,000 to fixed costs, 625,000/1,300,000) The formula for BE revenue is Fixed Costs/ C/S Ratio Shouldn't we divide £625,000 by 0.45? Thank you
John MoffatJohn MoffatTutor6y ago#1
No - because for the extra production the variable costs are 52% which means that the contribution is 100 - 52 = 48%.
AAnnaSupporter6y ago#2
Thank you very much !
John MoffatJohn MoffatTutor6y ago#3
You are welcome :-)
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