Asked by Samantha Stoner on May 05, 2024
Verified
If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even point (dollars) ?
A) $2,125,000
B) $340,000
C) $3,400,000
D) $1,416,666
Variable Costs
Expenses that fluctuate with the level of output or sales, such as raw materials and direct labor, making them distinct from fixed costs.
Break-even Point
The point at which total revenues equal total expenses, resulting in no profit or loss for the business.
- Analyze the break-even figures in terms of units and sales dollars given multiple cost and price setups.
Verified Answer
CN
cwengile ngejaneMay 09, 2024
Final Answer :
A
Explanation :
To find the break-even point in dollars, you use the formula: Break-even point = Fixed Costs / (1 - Variable Cost Percentage). Here, the variable cost percentage is 60% or 0.6. So, the calculation is $850,000 / (1 - 0.6) = $850,000 / 0.4 = $2,125,000.
Learning Objectives
- Analyze the break-even figures in terms of units and sales dollars given multiple cost and price setups.