Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below.

Sales $ 3,500,000
Cost of sales:
Direct Material $ 500,000
Direct labor 250,000
Variable Overhead 275,000
Fixed Overhead 600,000 1,625,000
Gross Profit $ 1,875,000
Selling and General & Admin. Exp.
Variable 750,000
Fixed 250,000 1,000,000
Operating Income $ 875,000The break-even point (rounded to the nearest dollar) for Evergreen Corporation for the current year is:
$1,724,138.
$2,625,000.
$2,155,172.
$1,865,672.

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2022-06-13T22:48:23+02:00

The break-even point (rounded to the nearest dollar) for Evergreen Corporation for the current year is: A. $1,724,138.

First step is to calculate the Variable costs

Variable costs = $500,000 + $250,000 + $275,000 + $750,000

Variable costs = $1,775,000

Second step is to calculate the Contribution margin ratio

Contribution margin ratio = (Sales - Variable costs) / Sales

Contribution margin ratio= ($3,500,000 - $1,775,000) / $3,500,000

Contribution margin ratio= 0.493×100

Contribution margin ratio =49.3%

Now let calculate the Break-even point

Break-even point = Fixed costs / Contribution margin ratio

Break-even point= ($600,000 + $250,000) / 0.493

Break-even point= $1,724,137.9

Break-even point =$1,724,138 (Approximately)

Therefore the break-even point (rounded to the nearest dollar) for Evergreen Corporation for the current year is:$1,724,138.

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