Q20-15RQ - Horngren'S Financial And Managerial Accounting

Question

What are the three approaches to calculating the sales required to achieve the breakeven point? Give the formula for each one.

 

Step-by-Step Solution

Answer

Answer

 

1. Equation approach
2. Contribution margin approach
3. Contribution margin ratio approach

 

Step 1:three approaches to calculating the sales required to achieve the breakeven point

1. Equation approach
2. Contribution margin approach
3. Contribution margin ratio approach

 

Step 2: Formula for three approaches

1. The equation approach:

Operating income= Net sales revenue – Total costs

 

1. Contribution margin approach:

Required sales in units = Fixed costs + Target profit /Contribution Margin Per unit

 

1. Contribution margin ratio approach

Contribution margin ratio = Fixed costs + Target profit / Contribution margin ratio