Q20-16RQ - Horngren'S Financial And Managerial Accounting

Question

Question: Of the three approaches to calculate sales required to achieve the breakeven point, which one(s) calculate the required sales in units and which one(s) calculate the required sales in dollars?

Step-by-Step Solution

Answer

Answer

 

1. Contribution margin approach
2. Contribution margin ratio approach

 

Step 1: Approach used to calculate the required sales in units

The contribution margin approach helps in calculating required sales in units. It is calculated by dividing the total fixed cost by contribution margin per unit. 

Step 2: Approach used to calculate the required sales in dollars

The contribution margin ratio approach helps in calculating required sales in units. It is calculated by dividing the total fixed cost by contribution margin ratio.