Scott Company's variable expenses are 72% of sales. The company's break-even point in dollar sales is $2,450,000. If sales are $60,000 below the break-even point, the company would report a:

Question

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First, we need to calculate Scott Company's total fixed costs. 
Break-even point = fixed costs / (1 - variable expenses as a percentage of sales) 
$2,450,000 = fixed costs / (1 - 0.72) 
Fixed costs = $2,450,000 x 0.28 
Fixed costs = $686,000

Next, we need to calculate the sales amount that would result in a $60,000 loss. 
Sales at $60,000 below break-even = break-even point - $60,000 
Sales at $60,000 below break-even = $2,450,000 - $60,000 
Sales at $60,000 below break-even = $2,390,000

Now, we can calculate the company's profit (or loss) at $2,390,000 in sales. 
Contribution margin = sales - variable expenses 
Contribution margin = $2,390,000 x 0.28 
Contribution margin = $669,200

Operating income = contribution margin - fixed costs 
Operating income = $669,200 - $686,000 
Operating income = -$16,800 (loss)

Therefore, the company would report a $16,800 loss if sales were $60,000 below the break-even point. The answer is C.

Scott Company's Variable Expenses Are 72% of Sales