Break-even in dollars is Fixed Costs divided by which of the following?

Break-even in dollars is Fixed Costs divided by which of the following?

• A. Contribution Margin Ratio
• B. Fixed Costs ÷ Contribution Margin Ratio
• C. Price
• D. Variable Cost

Answer: (B)

Break-even in dollars relies on how much of each sales dollar remains after subtracting variable costs. That remaining portion is the contribution margin ratio, which shows the share of every dollar of sales that can go toward fixed costs. By dividing fixed costs by this ratio, you determine the sales revenue needed to cover those fixed costs completely. For example, if fixed costs are 1,000 and the contribution margin ratio is 0.4, break-even sales are 1,000 / 0.4 = 2,500. The price and variable cost ideas don’t directly express how much each sales dollar contributes to fixed costs, and using them alone doesn’t yield the break-even revenue.

Break-even in dollars relies on how much of each sales dollar remains after subtracting variable costs. That remaining portion is the contribution margin ratio, which shows the share of every dollar of sales that can go toward fixed costs. By dividing fixed costs by this ratio, you determine the sales revenue needed to cover those fixed costs completely. For example, if fixed costs are 1,000 and the contribution margin ratio is 0.4, break-even sales are 1,000 / 0.4 = 2,500. The price and variable cost ideas don’t directly express how much each sales dollar contributes to fixed costs, and using them alone doesn’t yield the break-even revenue.