The following information describes a product expected to be produced and sold by Garr Company:Selling price………………………………………$80 per unitVariable costs……………………………………$32 per unitTotal fixed costs…………………………………$630,000Required:(a) Calculate the contribution margin ratio.(b) Calculate the break-even point in dollar sales.(c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?
What will be an ideal response?
(a) Contribution margin ratio = ($80 - $32)/80 = 60%
(b) Break-even point in dollars = $630,000/.6 = $1,050,000
(c) Pretax income of $120,000 = ($630,000 + $120,000)/.6 = $1,250,000
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