Question

In 2012, Teller Company sold 3,000 units at $300 each. Variable expenses were $210per unit, and fixed expenses were $120,000. The same selling price, variable expenses,and fixed expenses are expected for 2012. What is Teller's break-even point in salesdollars for 2012?

Answer 1

Teller's break-even point in sales dollars for 2012 is $400,000

Step-by-step explanation:

The formula to compute the break even point in dollars is shown below:

Break even point (in dollars) = (Fixed expenses) ÷ (contribution ratio)

where,

Fixed expense is $120,000

And, the contribution ratio equals to

= (Contribution per unit) ÷ (sales per unit) × 100

where,

Contribution is = Selling price - variable cost per unit

= $300 - $210

= $90 per unit

Now put the values to the above formula

So, the ratio would be

= ($90 per unit) ÷ ($300 per unit) × 100

= 30%

Now put the values to the above formula

So, the value would be

= $120,000 ÷ 30%

= $400,000