Sonoma Winery has fixed costs of $10,000 per year. Its warehouse sells wine with variable costs of 80% of its unit selling price. How much in sales does Sonoma need to break even per year?
A) $8,000
B) $2,000
C) $12,500
D) $50,000

Question

Quizplus · Accepted Answer

To break even, fixed costs must equal the contribution margin. With variable costs at 80% of sales, the contribution margin is 20%. Therefore, $10,000 / 0.20 = $50,000 in sales is needed to break even.

Sonoma Winery Has Fixed Costs of $10,000 Per Year