Figure 4-1.Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
-Refer to Figure 4-1. What is the break-even point in sales dollars?

Question

Quizplus · Accepted Answer

The break-even point in sales dollars can be calculated using the formula: Break-even Point = Fixed Costs / (1 - Variable Cost Ratio), where Variable Cost Ratio = Variable Costs / Sales. Here, Variable Cost Ratio = $147,000 / $420,000 = 0.35. Thus, Break-even Point = $227,500 / (1 - 0.35) = $350,000.