Johnson Company produces dolls.Each doll sells for $20.00.Variable costs per unit are $14.00 and total fixed costs for the period are $300,000.What is the break-even volume in dollars?
A) $50,000
B) $621,429
C) $1,000,000
D) $1,450,000

Question

Quizplus · Accepted Answer

The break-even volume in dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is $6 ($20 - $14), and the contribution margin ratio is $6/$20 = 0.3. Therefore, the break-even volume in dollars is $300,000 / 0.3 = $1,000,000.

Johnson Company Produces Dolls