Question

Ocean Company sells a product with a contribution margin ratio of 80%. Fixed costs are $2,800 per month. What amount of sales (in dollars) must Ocean Company have to break even? If each unit sells for $30, how many units must be sold to break even? Begin by showing the formula and then entering the amounts to calculate the sales in dollars Ocean must have to break even. (Abbreviation used: CM = contribution margin. Complete all input boxes. Enter a "0" for items with a zero value.) = Required sales in dollars = %

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Answer 1

Answer :- Calculation of Required sales in dollar and in units :-

Required Sales in dollars =(Fixed Cost + Target Profit)/ CM ratio

Required Sales in dollars = ($2,800 + $0) /80%

Required Sales in dollars = $3,500

Required Sales in units = Required Sales in dollars/ Sales price per unit

Required Sales in units = $3,500 / $30 = 116.66 or 117 units

You can Calculate the required sales in units by another method :-

Required Sales in Units = Fixed cost + Target profit / CM per unit

Required Sales in units = $2,800 + $0 / $30* 80%

Required sales in units = 116.66 or 117 units

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