Question

In 2019, Crane Company sold 3000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $150000. The same selling price, variable expenses, and fixed expenses are expected for 2020. What is Crane’s break-even point in sales dollars for 2020? $2300000. $1800000. $2571429. $500000.

Answer 1

$500,000

Step-by-step explanation:

The computation of the break even point in dollars is shown below:

= (Fixed cost) ÷ (Profit volume ratio)

where,

Profit volume ratio = Contribution margin per unit ÷ Selling price per unit

= $180 ÷ $600

= 0.3

Contribution margin per unit = Selling price per unit - variable cost per unit

= $600 - $420

= $180

And, the fixed cost is $150,000

Now put these values to the above formula

So, the value would be equal to

= $150,000 ÷ 0.3

= $500,000