Question

Adam Company sells one product at a price of $50 per unit. Variable expenses are 40 percent of sales, and fixed expenses are $50,000. The sales dollars level required to break even are:Select one:

Answer 1

To calculate the sales dollars level required to break even, find the contribution margin ratio and use it to divide the fixed expenses.

Step-by-step explanation:

To calculate the sales dollars level required to break even, we need to find the contribution margin ratio. The contribution margin ratio is equal to 1 - (variable expenses / sales). In this case, the variable expenses are 40% of sales, so the contribution margin ratio is 1 - 0.40 = 0.60.

The break-even point is where total sales revenue equals total expenses. Since fixed expenses are $50,000, we can calculate the break-even sales dollars using the formula: Break-even sales dollars = fixed expenses / contribution margin ratio = $50,000 / 0.60 = $83,333.33.

Answer 2

$83,333

Step-by-step explanation:

The sales dollars level required to break even are: $83,333