If fixed costs are $750,000 and variable costs are 60% of sales, the break-even point in sales dollars is
A)$1,250,000
B)$450,000
C)$1,875,000
D)$300,000

Question

Quizplus · Accepted Answer

To find the break-even point in sales dollars, we use the formula: Break-even point = Fixed Costs / (1 - Variable Cost Percentage). Here, Fixed Costs = $750,000 and Variable Costs = 60% of sales, so the Variable Cost Percentage = 60% or 0.6. Thus, Break-even point = $750,000 / (1 - 0.6) = $750,000 / 0.4 = $1,875,000.

If Fixed Costs Are $750,000 and Variable Costs Are 60