If fixed costs are $850,000 and variable costs are 60% of the sales, what is the break-even point (in dollars)?

Question

Quizplus · Accepted Answer

The break-even point can be calculated using the following formula:

Break-even point = Fixed costs / (1 - Variable costs as a percentage of sales)

In this case, fixed costs are $850,000 and variable costs are 60% of sales. This means that variable costs as a percentage of sales can be written as 0.6.

Using the formula, we get:

Break-even point = $850,000 / (1 - 0.6) = $850,000 / 0.4 = $2,125,000

Therefore, the break-even point is $2,125,000. The best choice is C.

If Fixed Costs Are $850,000 and Variable Costs Are 60