Question

Dalian Company provides the following information: Price per unit: $20 Variable cost per unit: $8 Fixed costs per month: $15,000 What is the breakeven point in sales dollars? $22,750 $25,000 $18,500 $37,500

Answer 1

$25,000

Step-by-step explanation:

Break even point in dollars =
`(Fixed cost)/(Contribution Margin)`

Here contribution margin = Sales - Variable cost = $20- $8 = $12

Contribution margin ratio = $12/$20 = 60%

Break even point in dollars = $15,000/60% = $25,000

Else it can be calculated by using contribution per unit as follows:

BEP = $15,000/$12 = 1,250 units

Value of 1,250 units $20 X 1250 = $25,000

Break Even Point in Sales Dollar = $25,000