A company with sales of $50,000, variable costs of $35,000, and fixed costs of $25,000 will reach its breakeven point if sales are increased by $20,000.

Question

Quizplus · Accepted Answer

The breakeven point is reached when total sales equal total costs (variable + fixed). Here, the initial total costs are $35,000 (variable) + $25,000 (fixed) = $60,000. The company needs sales of $60,000 to break even, not the $70,000 ($50,000 initial sales + $20,000 increase) implied.

A Company with Sales of $50,000, Variable Costs of $35,000