Pharoah Corp. had total variable costs of $179,400, total fixed costs of $74,400, and total revenues of $260,000. Compute the required sales in dollars to break even. Required sales tA $
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
![### Break-Even Analysis Calculation for Pharoah Corp.
Pharoah Corp. incurred the following financial figures:
- **Total Variable Costs:** $179,400
- **Total Fixed Costs:** $74,400
- **Total Revenues:** $260,000
### Task:
**Compute the required sales in dollars to break even.**
#### Calculation:
The required sales can be calculated using the break-even point formula.
\[ \text{Break-Even Point (Sales in Dollars)} = \frac{\text{Total Fixed Costs}}{\text{Contribution Margin Ratio}} \]
Where,
\[ \text{Contribution Margin Ratio} = \frac{\text{Total Revenues} - \text{Total Variable Costs}}{\text{Total Revenues}} \]
#### Input Box:
**Required Sales ($):**
\[ \boxed{\_\_\_\_\_\_\_\_\_\_} \]
Please fill in the formula and solve it to find out the required sales in dollars for Pharoah Corp. to achieve breakeven.
### Educational Tip:
Understanding and calculating the break-even point is crucial for businesses to determine the minimum sales necessary to cover all expenses, leading to no profit and no loss.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F37e2f913-30b2-4c8c-98d5-339163057ff1%2F3e56424e-6301-4f47-a78a-f34c2062f8d9%2F3le86ci_processed.jpeg&w=3840&q=75)
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