Question

Mix Sweet Shop bakes and sells pies. Mix has annual fixed costs of​ $880,000 and a variable cost per pie of​ $7.50. Each pie sells for​ $15.50 each. The firm expects to sell​ 500,000 pies annually. What is the break−even point in sales​ dollars?Select one:

a. 190,440
b. 110,000
c. 200,000
d. 280,000

Answer 1

Break-even point in units= 110,000

Break-even point in dollars= $1,705,00

Step-by-step explanation:

Giving the following information:

Mix has annual fixed costs of​ $880,000 and a variable cost per pie of​ $7.50. Each pie sells for​ $15.50 each. The firm expects to sell​ 500,000 pies annually.

We need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 880,000/ [(15.5 - 7.5)/15.5]= $1,705,000

Break-even point (units)= fixed costs/ contribution margin

Break-even point= 880,000/ (15.5 - 7.5)= 110,000 units