Parker Co. is preparing next period's forecasts. Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%.(a) Calculate the company's break-even point in dollar sales.(b) If sales are $1,800,000 above the break-even point, what will Parker's pretax income be?
What will be an ideal response?
| (a) Break-even point in dollars | = Fixed costs/Contribution margin ratio |
= $1,000,000
| (b) Income before taxes | = (*Sales ? Contribution margin ratio) - Fixed costs |
= $540,000
*$1,000,000 + $1,800,000
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