North Company sells a single product.The product has a selling price of $30 per unit and variable expenses of 70% of sales.If the company's fixed expenses total $60,000 per year,then it will have a break-even in sales dollars of:

Question

Quizplus · Accepted Answer

To find the break-even point in sales dollars, we use the formula: Fixed Expenses / Contribution Margin Ratio. The contribution margin ratio is 1 - Variable Expense Ratio. Here, the variable expense ratio is 70%, so the contribution margin ratio is 30% (1 - 0.70). Thus, the break-even point is $60,000 / 0.30 = $200,000.

North Company Sells a Single Product