If fixed costs are $300,000 and variable costs are 70% of break-even sales, profit is zero when sales revenue is $1,000,000.

Question

Quizplus · Accepted Answer

To calculate the break-even point, we need to use the following formula:

Break-even point = Fixed costs / (Sales price per unit - Variable costs per unit)

Let's assume that the sales price per unit is $1. In that case, the variable costs per unit would be 70 cents, since variable costs are 70% of break-even sales.

So, the break-even point would be:

Break-even point = $300,000 / (1 - 0.70) = $1,000,000

This means that to break even, the company needs to generate $1,000,000 in sales revenue.

Therefore, if profit is zero when sales revenue is $1,000,000, the statement "If fixed costs are $300,000 and variable costs are 70% of break-even sales, profit is zero when sales revenue is $1,000,000" is true.

If Fixed Costs Are $300,000 and Variable Costs Are 70