Preyer Corporation produces and sells a single product. Data concerning that product appear below: The break-even in monthly dollar sales is closest to:
A)$2,344,795
B)$492,407
C)$623,300
D)$1,153,501

Question

Preyer Corporation produces and sells a single product. Data concerning that product appear below:  The break-even in monthly dollar sales is closest to:
A)$2,344,795 
B)$492,407 
C)$623,300 
D)$1,153,501

Quizplus · Accepted Answer

The break-even point can be calculated using the following formula:

Break-even point (in dollars) = Fixed expenses ÷ Contribution margin ratio

Fixed expenses = $630,000 + $180,000 = $810,000

Contribution margin ratio = (Selling price – Variable expenses) ÷ Selling price

= ($70 - $25) ÷ $70

= 0.643

Break-even point = $810,000 ÷ 0.643

= $1,259,225

Therefore, the closest option is C) $623,300.

Preyer Corporation Produces and Sells a Single Product