Question

Sheridan Company produces flash drives for computers, which it sells for $20 each. The variable cost to make each flash drive is $13. During April, 650 drives were sold. Fixed costs were $1400 for the month. How much is the monthly break-even level of sales in dollars for Sheridan? $4000 $200 $3250 $13000

Answer 1

$4,000

Explanation:

The computation of break-even is shown below:-

Contribution margin ratio = (SP per unit - VC per unit) ÷ SP per unit

= ($20 - $13) ÷ $20

= 35%

Break-even sales dollars = Total Fixed Costs ÷ Contribution margin ratio

Break-even sales dollars = $1,400 ÷ 35%

= $4,000

Therefore we applied the above formula.

Hence, the break even sales in dollars is $4,000