Question

The following information pertains to Ashley's 2023 operations:

Selling price per unit $50
variable cost per unit $30
Total fixed costs $1,25,000
Ashley's break-even point in sales dollars is:

Answer 1

Ashley's break-even point in sales dollars is calculated by dividing the total fixed costs by the difference between selling price per unit and variable cost per unit, resulting in $312,500.

Step-by-step explanation:

The question pertains to calculating the break-even point in sales dollars for Ashley's business based on provided information. To calculate the break-even point, we use the formula:

Break-even point in units = Total fixed costs ÷ (Selling price per unit - Variable cost per unit)

Break-even point in dollars = Break-even point in units × Selling price per unit

For Ashley's business:

Break-even point in units = $125,000 ÷ ($50 - $30) = $125,000 ÷ $20 = 6250 units

Break-even point in dollars = 6250 units × $50 = $312,500

Ashley's business must generate $312,500 in sales to reach the break-even point where total revenue equals total costs.