Dirth Company sells only one product at a regular price of $7.50 per unit.Variable expenses are 60 percent 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
- What is the sales dollars level required to break even at the old price of $7.50?

Question

Quizplus · Accepted Answer

To find the break-even sales dollars at the old price of $7.50, calculate the contribution margin per unit: $7.50 - (60% of $7.50) = $3.00. Then, divide the fixed expenses by the contribution margin ratio: $30,000 / ($3.00 / $7.50) = $75,000.

Dirth Company Sells Only One Product at a Regular Price