A company's total fixed costs are $150,000. Variable costs per unit as a percentage of selling price equal 30 percent. The firm's break-even point in dollar sales equals $214,286.

Question

Quizplus · Accepted Answer

The break-even point is calculated as fixed costs divided by the contribution margin ratio. The contribution margin ratio is equal to 1 minus the variable cost ratio. In this case, the variable cost ratio is 30%, so the contribution margin ratio is 70%. Therefore, the break-even point is $150,000 / 0.70 = $214,286.

A Company's Total Fixed Costs Are $150,000