If fixed costs are $850,000 and variable costs are 70% of sales,what is the break-even point (in dollars)?

Question

Quizplus · Accepted Answer

The formula to calculate the break-even point is:

Break-even point = Fixed Costs / Contribution Margin

Where,

Contribution Margin = Sales - Variable Costs

Given that fixed costs are $850,000 and variable costs are 70% of sales, we can write:

Contribution Margin = Sales - 0.7 * Sales = 0.3 * Sales

Substituting the values in the formula, we get:

Break-even point = $850,000 / 0.3 = $2,833,333

Therefore, the break-even point (in dollars) is $2,833,333.

Option C is the correct answer.

If Fixed Costs Are $850,000 and Variable Costs Are 70