The Agate Corporation manufactures and sells two types of bookcases, standard and deluxe. Agate expects the following operating results next year for each type of bookcase: Agate expects to have a total of $57,600 in fixed expenses next year. What is Agate's break-even point next year in sales dollars?
A)$72,000
B)$144,000
C)$96,000
D)$240,000

Question

The Agate Corporation manufactures and sells two types of bookcases, standard and deluxe. Agate expects the following operating results next year for each type of bookcase:  Agate expects to have a total of $57,600 in fixed expenses next year. What is Agate's break-even point next year in sales dollars?
A)$72,000 
B)$144,000 
C)$96,000 
D)$240,000

Quizplus · Accepted Answer

To find the break-even point, we need to calculate the total contribution margin and use it to determine the sales revenue needed to cover the fixed expenses.

Total contribution margin = (selling price - variable cost) x number of units sold
For standard bookcases: ($100 - $60) x 400 = $16,000
For deluxe bookcases: ($200 - $130) x 200 = $14,000

Total contribution margin = $16,000 + $14,000 = $30,000

Break-even point = fixed expenses / contribution margin
Break-even point = $57,600 / $30,000
Break-even point = $1.92

Therefore, Agate's break-even point next year in sales dollars is $96,000 (break-even point in units x selling price per unit), which is option C.

The Agate Corporation Manufactures and Sells Two Types of Bookcases