One can determine the break-even point in sales dollars (instead of units) by dividing the company’s total fixed expenses by the **contribution margin ratio**.

**The contribution margin ratio is the contribution margin divided by sales (revenues)**.

The ratio can be calculated using company totals or per unit amounts. We will compute the contribution margin ratio for the Oil Change Co. by using its per unit amounts:

Revenues or Sales per car $24

Variable Expenses per car __– 9__

Contribution Margin per car $15

**Contribution Margin Ratio** = Contribution Margin ÷ Revenues or Sales

**Contribution Margin Ratio** = $15 ÷ $24

**Contribution Margin Ratio** = **62.5%**

The break-even point in sales dollars for Oil Change Co. is

**Break-even Point in Sales $** = Total Fixed Expenses ÷ Contribution Margin Ratio

**Break-even Point in Sales $** = $2,400 per week ÷ 62.5%

**Break-even Point in Sales $** = **$3,840 per week**

The break-even point of $3,840 of sales per week can be verified by referring back to the break-even point in units. Recall there were 160 units necessary to break-even. At $24 per unit the necessary sales in dollars would be $3,840.

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