To determine the sales amount last year, we can use the break-even analysis formula:
Break-even point = Fixed expenses / (1 - (Variable Expenses/Sales))
Given that the break-even point in sales is $725,000 and variable expenses are 75% of sales, we can calculate the fixed expenses using the formula:
$725,000 = Fixed expenses / (1 - (75% / 100%))
Simplifying the equation:
$725,000 = Fixed expenses / (1 - 0.75)
$725,000 = Fixed expenses / 0.25
Cross-multiplying:
Fixed expenses = $725,000 * 0.25
Fixed expenses = $181,250
Since the company lost $18,100 last year, we can determine the sales amount using the formula:
Sales = Fixed expenses + Variable expenses
Variable expenses = 75% of sales
Variable expenses = 0.75 * Sales
Given that the loss last year was $18,100:
Sales = $181,250 + 0.75 * Sales - $18,100
Rearranging the equation to solve for sales:
0.25 * Sales = $163,150
Sales = $163,150 / 0.25
Calculating the sales amount:
Sales = $652,600
Therefore, the sales amount last year must have amounted to $652,600.