Question

Given total fixed costs of $35,000 and a contribution margin ratio of 40%, __ of revenue must be earned to break even

Answer 1

To break even, the center needs to earn enough revenue to cover its fixed costs. The contribution margin ratio is used to calculate the amount of revenue needed to break even.

Step-by-step explanation:

To break even, the center needs to earn enough revenue to cover its fixed costs. The contribution margin ratio is the percentage of revenue that contributes towards covering fixed costs and generating profit. In this case, the contribution margin ratio is 40%, which means that for every dollar of revenue, 40 cents can go towards covering fixed costs and generating profit. To find the amount of revenue needed to break even, divide the fixed costs by the contribution margin ratio: $35,000 / 0.40 = $87,500. So, $87,500 of revenue must be earned to break even.