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John Moffat.
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sabitajacobs
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Can I get some assistance with this question please….. I’m having problems with the incremental part.
A company has fixed costs of $1.3 million. Variable costs are 55% of sales up to a sales level of $1.5 million but at higher volumes of production and sales the variable cost for incremental production units falls to 52% of sales. What is the break even point in sales revenue to the nearest $1000?
John Moffat
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You can calculate the profit at the $1.5M sales level.
Then you know the extra profit needed to breakeven (which will be the same as the extra contribution needed because fixed costs won’t change).
Then you can calculate the extra revenue needed at the new variable cost %.
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