The following information data pertains to a manufacturing company:
Total sales $80,000
Total variable costs 20,000
Total fixed costs 30,000
What is the breakeven level in sales dollars?
The contribution margin ratio is the contribution margin (sales of $80,000 less variable costs of $20,000, or $60,000) divided by the sales revenue of $80,000, or 0.75.
Breakeven revenue is found by dividing the fixed costs of $30,000 by the contribution margin ratio of 0.75, for breakeven sales revenue of $40,000.