A company with sales of $50,000, variable costs of $35,000, and fixed costs of $25,000 will reach its breakeven point if sales are increased by $20,000.

Question

Quizplus · Accepted Answer

The breakeven point is reached when total sales equal total costs (variable + fixed). With current sales of $50,000, variable costs of $35,000, and fixed costs of $25,000, the company is at a loss of $10,000. Increasing sales by $20,000 will not cover the $10,000 loss and the additional $7,000 in variable costs (35% of $20,000), resulting in a new loss of $3,000.

A Company with Sales of $50,000, Variable Costs of $35,000