Sweet Tooth Bakery bakes and sells pies.Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50.Each pie sells for $15.50 each.The firm expects to sell 500,000 pies annually.What is the break-even point in sales dollars?

Question

Quizplus · Accepted Answer

The break-even point in sales dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per pie is $15.50 - $7.50 = $8.00. The contribution margin ratio is $8.00 / $15.50 = 0.5161. The break-even point in sales dollars is $880,000 / 0.5161 = $1,705,000.

Sweet Tooth Bakery Bakes and Sells Pies