Diamonds in the Ruff sells only one product at a regular price of $7.50 per unit.Variable expenses are 60% of sales,and fixed expenses are $30,000.Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales.How many sales (in dollars)were required to break even at the old price of $7.50 per unit?
A)$12,000
B)$18,000
C)$50,000
D)$75,000

Question

Quizplus · Accepted Answer

To find the break-even sales in dollars at the old price, we first calculate the contribution margin per unit: $7.50 - (60% of $7.50) = $3.00. The break-even point in units is fixed expenses divided by the contribution margin per unit: $30,000 / $3.00 = 10,000 units. Therefore, the break-even sales in dollars is 10,000 units * $7.50 = $75,000.

Diamonds in the Ruff Sells Only One Product at a Regular