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The Prentice Company has provided the following information: What is the breakeven point in sales dollars? A) \( \$ 250,000 \) B) \( \$ 600,000 \) C) \( \$ 400,000 \)

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Final answer:

The accounting profit is calculated by subtracting total expenses from sales revenue. For the firm in question, with $1 million in sales and $950,000 in expenses, the accounting profit is $50,000.

Step-by-step explanation:

To calculate the accounting profit of a firm, you subtract the total expenses from the total sales revenue. In this case, the firm had sales revenue of $1 million and expenses that include $600,000 on labor, $150,000 on capital, and $200,000 on materials. So, the accounting profit can be calculated as follows:

Sales Revenue - Total Expenses = Accounting Profit

$1,000,000 - ($600,000 + $150,000 + $200,000) = Accounting Profit

$1,000,000 - $950,000 = $50,000

Therefore, the firm's accounting profit is $50,000.

The breakeven point in sales dollars is the level of sales revenue at which a company neither makes a profit nor incurs a loss. It is the point where total revenue equals total costs. To calculate the breakeven point, you need to determine the fixed costs and the contribution margin.

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