The selling price of a particular product is $7.00 per unit, the variable expense is $2.00 per unit, and the breakeven sales in dollars is $25,319, what are total fixed expenses?

Question

Quizplus · Accepted Answer

The breakeven sales formula is:

Breakeven sales = (Fixed expenses / Contribution margin ratio)

Contribution margin ratio = (Selling price - Variable expenses) / Selling price

Given that selling price is $7.00 and variable expenses are $2.00, the contribution margin ratio is:

($7.00 - $2.00) / $7.00 = 0.714

Substituting the breakeven sales in dollars and the contribution margin ratio in the breakeven sales formula, we get:

$25,319 = Fixed expenses / 0.714

Fixed expenses = $25,319 / 0.714 = $35,385.17

Therefore, the total fixed expenses are $18,085. Answer choice D is correct.

The Selling Price of a Particular Product Is $7