North Company sells a single product. The product has a selling price of $30 per unit and variable expenses of 70% of sales. If the company's fixed expenses total $60,000 per year, then it will have a break-even in sales dollars of:

Question

Quizplus · Accepted Answer

The break-even point in sales dollars can be calculated using the formula: Break-even Sales = Fixed Expenses / Contribution Margin Ratio. The contribution margin ratio is 1 - Variable Expense Ratio, which is 1 - 0.70 = 0.30. Therefore, Break-even Sales = $60,000 / 0.30 = $200,000.

North Company Sells a Single Product