QuadCity Manufacturing,Inc.reported the following items: Sales = $6,000,000; Variable Costs of Production = $1,500,000; Variable Selling and Administrative Expenses = $550,000; Fixed Costs = $1,350,000; EBIT = $2,600,000; and the Marginal Tax Rate = 35%.QuadCity's break-even point in sales dollars is
A) $2,050,633.
B) $2,197,500.
C) $2,438,750.
D) $2,785,000.

Question

Quizplus · Accepted Answer

Break-even point in sales dollars = Fixed Costs / (1 - Variable Costs / Sales)= 1,350,000 / (1 - (1,500,000 + 550,000) / 6,000,000)= 1,350,000 / (1 - 34.17%)= 1,350,000 / 0.6583= $2,050,633