Bonda, Inc. sells its product for $90. It has a variable cost ratio of 50% and total fixed costs of $14,000. What is the break-even point in sales dollars?
A) $3,600
B) $7,000
C) $14,000
D) $28,000

Question

Quizplus · Accepted Answer

The break-even point in sales dollars 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 50%. Therefore, the contribution margin ratio is 50%. The break-even point in sales dollars is $14,000 / 0.50 = $28,000.