Question

Atlas Company sells only one product at a regular price of $10.00 per unit. Variable expenses are 70% of sales, and fixed expenses are $50,000. Management has decided to decrease the selling price to $9.00 in the hope of increasing its volume of sales. What is the sales dollars level required to break even at the old price of $10.00? (Note: Round answer to two decimal places.)

Answer 1

= $166,666.67

Step-by-step explanation:

Sale Price per unit = $10.00

Contribution margin Ratio = 30%

Unit variable cost = $7.00

Contribution margin = $3.00

Fixed cost = $50,000

The computation of Break even point in dollar sales is shown below:-

Break Even point in Unit Sales = Fixed cost ÷ Contribution margin

= $50,000 ÷ $3.00

= $16,666.67

Break even point in dollar sales = Fixed cost ÷ Contribution margin ratio

= $50,000 ÷ 30%

= $166,666.67

So, we applied the above formula.