CIMA BA2 · Chapter 10 · Question 7 of 12
A company's results for two periods, with no change in selling price, unit variable cost or fixed costs, were: Period 1: sales $400,000, profit $30,000 Period 2: sales $520,000, profit $72,000 What is the breakeven sales revenue, to the nearest $?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $314,286
Explanation
C/S ratio = change in profit / change in sales = ($72,000 - $30,000) / ($520,000 - $400,000) = $42,000 / $120,000 = 35%. Fixed costs = contribution - profit = ($400,000 x 35%) - $30,000 = $140,000 - $30,000 = $110,000. Breakeven revenue = $110,000 / 0.35 = $314,286 to the nearest $.
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