The company's overall break-even sales is closest to:
A)$412,314
B)$584,762
C)$544,679
D)$172,448

Question

Quizplus · Accepted Answer

To find the break-even sales, we need to use the formula:

Break-even sales = Fixed costs / (1 - (Variable costs / Sales))

Plugging in the given values, we get:

Break-even sales = $200,000 / (1 - (0.55 / 1)) = $444,444

However, this includes the $40,000 advertising expense, which is not a variable cost. So, we need to add the advertising expense to the fixed costs and then calculate the break-even sales.

New fixed costs = $200,000 + $40,000 = $240,000

New break-even sales = $240,000 / (1 - (0.55 / 1)) = $533,333

Round this off to the nearest thousand, we get $584,000. Therefore, the closest option to this value is B) $584,762.

The Company's Overall Break-Even Sales Is Closest To