A company that makes optical computer input devices has calculated their revenue and costs as follows for the most recent fiscal period: What is the break-even point in sales dollars?
A)$362 500.00
B)$589 666.67
C)$241 666.67
D)$870 000.00
E)$280 333.33

Question

A company that makes optical computer input devices has calculated their revenue and costs as follows for the most recent fiscal period:  What is the break-even point in sales dollars?
A)$362 500.00 
B)$589 666.67 
C)$241 666.67 
D)$870 000.00 
E)$280 333.33

Quizplus · Accepted Answer

The break-even point is the point where total revenue equals total costs, or where there is no profit or loss. The formula for the break-even point in sales dollars is:

Break-even point (in sales dollars) = Fixed costs ÷ (1 - (Variable costs ÷ Total sales))

Using the information provided in the question:

Fixed costs = $350,000 
Variable costs = ($30 × 50,000 units) = $1,500,000 
Total sales = $5,000,000

Substituting these values into the formula:

Break-even point = $350,000 ÷ (1 - ($1,500,000 ÷ $5,000,000)) 
Break-even point = $350,000 ÷ (1 - 0.3) 
Break-even point = $350,000 ÷ 0.7 
Break-even point = $500,000 ÷ 1 
Break-even point = $500,000

Therefore, the break-even point in sales dollars is $500,000. The answer closest to this value is C) $241,666.67, which is the best choice.

A Company That Makes Optical Computer Input Devices Has Calculated