A firm has total fixed costs of $500,000. Its variable costs per unit are 30 percent of its selling price. Its break-even point in sales dollars
A) is $650,000.
B) is $714,286.
C) is $800,000.
D) cannot be determined based on the data provided.

Question

Quizplus · Accepted Answer

The break-even point in sales dollars is calculated by dividing total fixed costs by the contribution margin ratio. The contribution margin ratio is 1 minus the variable cost percentage, which is 0.70 (1 - 0.30). Therefore, the break-even point is $500,000 / 0.70 = $714,286.

A Firm Has Total Fixed Costs of $500,000