Question

A product sells for $205 per unit, and its variable costs are 60% of sales. The fixed costs are $464,000. What is the break-even point in sales dollars?

Answer 1

Answer: $1,160,000

Step-by-step explanation: The Break even point depicts the amount of sales by making which the company will be at no profit or no loss situation. It can be computed using following formula :-

`Breakeven\:point=(Fixed\:cost)/(contribution\:margin\:ratio)`

where,

contribution margin = 1 - variable cost ratio

= 1 - 0.6

= 0.4

so, putting the values into equation we get :-

`Breakeven\:point=(\$464,000)/(0.4)`

= $1,160,000