Cornwell Company,a producer of electronic components,has the following information:
$\begin{array}{ll}
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 8.00 \
\text { Variable cost per unit } & \$ 3.00\\text { Total fixed costs }&\$120,000.00
\end{array}$
The break-even point in dollars is ________.
A) $150,000
B) $180,000
C) $192,000
D) $320,000

Question

Quizplus · Accepted Answer

The break-even point in dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is the selling price per unit minus the variable cost per unit, which is $8.00 - $3.00 = $5.00. The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, which is $5.00 / $8.00 = 0.625 or 62.5%. Therefore, the break-even point in dollars is the total fixed costs divided by the contribution margin ratio, which is $120,000 / 0.625 = $192,000.

Cornwell Company,a Producer of Electronic Components,has the Following Information The Break-Even Point in Dollars Is ________