Baker Company sells its product for £60. In addition, it has a variable cost ratio of 40 percent and total fixed costs of £9,000. What is the break-even point in monetary sales for Baker Company?
A) £3,600
B) £5,400
C) £15,000
D) £9,000

Question

Quizplus · Accepted Answer

The break-even point in monetary sales is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin ratio is 1 minus the variable cost ratio, which is 1 - 0.40 = 0.60. Therefore, the break-even point is £9,000 / 0.60 = £15,000.

Baker Company Sells Its Product for £60