US CMA Part 2 · Chapter 5 · Question 2 of 15
Newbury Bakery has a contribution margin ratio of 40% and annual fixed costs of $480,000. What is its breakeven point in sales dollars?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $1,200,000
Explanation
Breakeven sales dollars = fixed costs / contribution margin ratio = $480,000 / 40% = $1,200,000. Dividing by the variable cost ratio (60%) gives $800,000, which is incorrect.
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