Data concerning Wang Corporation's single product appear below: The break-even in monthly dollar sales is closest to:
A)$207,000
B)$255,321
C)$138,690
D)$420,273

Question

Data concerning Wang Corporation's single product appear below:  The break-even in monthly dollar sales is closest to:
A)$207,000 
B)$255,321 
C)$138,690 
D)$420,273

Quizplus · Accepted Answer

The formula for calculating break-even in dollar sales is:

Break-even point = Fixed costs / Contribution margin ratio

From the given data:
Selling price per unit = $90
Variable cost per unit = $54
Contribution margin per unit = Selling price per unit - Variable cost per unit = $90 - $54 = $36
Fixed costs = $720,000

Contribution margin ratio = Contribution margin per unit / Selling price per unit = $36 / $90 = 0.4
Break-even point = $720,000 / 0.4 = $1,800,000 / 12 = $150,000 per month

Therefore, the closest option to the calculated break-even point is $207,000 (Option A).

Data Concerning Wang Corporation's Single Product Appear Below: the Break-Even