If fixed costs are $500 000 and variable costs are 75% of the selling price,the break-even point in sales dollars is:

Question

Quizplus · Accepted Answer

Let's say the selling price is x.
Then, variable cost would be 0.75x
Total cost would be fixed cost plus variable cost, which is:
500000 + 0.75x
Break-even point is when total revenue equals total cost. Therefore:
x = 1.33333(total cost)
x = 1.33333(500000 + 0.75x)
x = 666666.5 + 0.9999975x
0.0000025x = 666666.5
x = 266666666.7
Therefore, the break-even point in sales dollars is $2,000,000 (rounded to the nearest dollar).
So, the answer is C.

If Fixed Costs Are $500 000 and Variable Costs Are