Question

Kaplan, Inc. produces flash drives for computers, which it sells for $27 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan? Select one:

a. $100
b. $2,700
c. $14,000
d. $8,400

Answer 1

Break even sales will be $2700

So option (b) will be correct option

Step-by-step explanation:

We have given fixed cost = $1400

Sells per unit = $27 each

And variable cost per unit = $13 each

So contribution margin ratio
`=(sales\ per\ unit-variable\ cost\ perunit)/(sales\ per\ unit)=(27-13)/(27)=0.5185`

We know that break even sales is given by

Break even sales
`=(fixed\ cost)/(contribution\ margin\ ratio)=(1400)/(0.5185)=$2700`

So option (b) will be correct answer