Lore Corporation has provided the following information: Lore's break-even point in dollar sales is:
A)$50,000
B)$10,000
C)$12,500
D)$40,000

Question

Lore Corporation has provided the following information:  Lore's break-even point in dollar sales is:
A)$50,000 
B)$10,000 
C)$12,500 
D)$40,000

Quizplus · Accepted Answer

The break-even point in dollar sales can be calculated using the formula: 
Break-even point = fixed costs / (1 - (variable costs / sales)).
From the given information, we know that Lore's total fixed costs are $25,000, and its contribution margin ratio (1 - variable costs / sales) is 60% (calculated by subtracting the variable costs from the sales and dividing by sales). 
So, plugging in these numbers, we get:
Break-even point = $25,000 / (1 - (0.6))
Break-even point = $25,000 / 0.4
Break-even point = $62,500
Therefore, the correct answer is C) $12,500, which is the closest option to the calculated break-even point.

Lore Corporation Has Provided the Following Information: Lore's Break-Even