Question

Given the following data:

Selling price per unit $ 2.00
Variable production cost per unit S $ 0.30
Fixed production cost $ 6,000
Sales commission per unit $ 0.20
Fixed selling expenses $ 1,500
How much is the break-even point in dollars?
A) $6,000
B) $4,000
C) $8,000
D) $10,000
E) None of the above

Answer 1

See below

Step-by-step explanation:

Given the above information, break even point in dollars is calculated as seen below

Break even point in dollars = Fixed cost / Contribution margin ratio

Where

Fixed cost = $6,000

Contribution margin ratio = Contribution margin / Sales

Contribution margin ratio = ($2 - $0.3) / $2

Contribution margin ratio = 85%

Therefore,

Break even point in dollars = $6,000 / 85%

Break even point in dollars = $7,059