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Sabv Corporation's break-even-point in sales is $890,000, and its variable expenses are 70% of sales. If the company lost $39,000 last year, sales must have amounted to:

Answer :

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Answer:

Sales must have amounted to $760,000

Explanation:

We need to calculate from the bottom to the top of the Contribution Income Statement

Step 1

Break Even Point (Dollars) = Fixed Cost ÷ Contribution Margin

Where,

Contribution Margin = 100 % - 70%

                                  = 30 %

Therefore,

Step 2

Fixed Costs = Break Even Point (Dollars) × Contribution Margin

                    = $890,000 × 30 %

                    = $267,000

Step 3

We know that,

Net Income/ loss = Contribution - Fixed Costs

Therefore

Contribution = Net Income/ loss + Fixed Costs

                     = - $39,000 + $267,000

                     = $228,000

Step 4

Finally, we need to calculate the amount in sales

Sales = 100/30 × $228,000

         = $760,000

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