I have a homework problem i am having trouble solving. How do i solve it without

Question

I have a homework problem i am having trouble solving. How do i solve it without the fixed cost? Thanks Kathy

The "Dog Hut" hot dog stand expects the following operating results for next year:

                        Sales......................................................... $280,000

                        Net income............................................. $ 21,000

                        Contribution margin ratio........................ 70%

What is Dog Hut's breakeven point next year in sales dollars?

            A)$120,000         B)$181,300         C)$196,000         D)$250,000        E)none of the above

Explanation / Answer

Solution-

D)$250,000

Calculation-

BE sales ($) = FC / CMR = 175,000 / 70% = $250,000

FC = CM – NI = Sales * CMR – NI = 280,000 * 70% - 21,000 = $175,000

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