Fixed cost is $96,000 and contribution margin ratio is 32 percent. What sales amount breaks even?
Correct Answer
D) $300,000.
Break-even sales are fixed cost divided by contribution margin ratio: $96,000 / 0.32 = $300,000.
Why This Is the Correct Answer
Break-even sales are fixed cost divided by contribution margin ratio: $96,000 / 0.32 = $300,000.
Why the Other Options Are Wrong
Option A: $96,000.
$96,000 never divides by 0.32. The correct calculation is 96,000 / 0.32 = 300,000.
Option B: $30,720.
$30,720 multiplies by 0.32 instead of dividing. The correct calculation is 96,000 / 0.32 = 300,000.
Option C: $3,000,000.
$3,000,000 misplaces the decimal point, giving ten times the correct amount. The correct calculation is 96,000 / 0.32 = 300,000.
Reference Hint
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