Johnston Co. has total variable costs equal to 40% of sales. Fixed costs are $120,000. What is the breakeven point in revenues?
A)$300,000
B)$200,000
C)$120,000
D)Cannot be determined

Question

Quizplus · Accepted Answer

To find breakeven point, we need to use the following formula:

Breakeven point = Fixed costs / (1 - Variable cost %)

Variable cost % = 40%
Fixed costs = $120,000

Breakeven point = $120,000 / (1 - 0.40) = $200,000

Therefore, the breakeven point in revenues is $200,000. Option B is the correct answer.