Grey,Inc.sells a single product for $20.Variable costs are $8 per unit and fixed costs total $120,000 at a volume level of 5,000 units.Assuming that fixed costs do not change,Green's break-even sales would be:

Question

Quizplus · Accepted Answer

To calculate the break-even sales, we can use the formula:
Break-even sales = (Fixed costs / Contribution margin ratio)
Contribution margin per unit = Sales price per unit - Variable costs per unit
Contribution margin ratio = Contribution margin per unit / Sales price per unit

In this case, the contribution margin per unit is:
$20 (sales price) - $8 (variable costs) = $12

The contribution margin ratio is:
$12 (contribution margin per unit) / $20 (sales price) = 0.6 or 60%

Using the formula, we can calculate the break-even sales:
Break-even sales = ($120,000 fixed costs) / 0.6 (contribution margin ratio) = $200,000.

Therefore, the best choice is B: $200,000.

Grey,IncSells a Single Product for $20