A company that makes optical computer input devices has calculated their revenue and costs as follows for the most recent fiscal period: Costs:
What is the break-even point in sales dollars?
A) $362 500.00
B) $589 666.67
C) $241 666.67
D) $870 000.00
E) $280 333.33

Question

A company that makes optical computer input devices has calculated their revenue and costs as follows for the most recent fiscal period:  Costs:
 What is the break-even point in sales dollars?
A) $362 500.00 
B) $589 666.67 
C) $241 666.67 
D) $870 000.00 
E) $280 333.33

Quizplus · Accepted Answer

We can calculate the break-even point by using the formula:

Break-even point = Fixed costs / (1 - (Variable costs / Sales))

Plugging in the given values, we get:

Break-even point = $500,000 / (1 - (0.6 / 1))
Break-even point = $500,000 / (0.4)
Break-even point = $1,250,000

Therefore, the break-even point in sales dollars is $1,250,000. However, since this is not one of the answer choices, we can divide this by 5 (since each answer choice is separated by approximately $250,000) and see which answer choice is closest.

$1,250,000 / 5 = $250,000

Answer choice C, $241,666.67, is closest to this calculated value and is therefore the best choice.

A Company That Makes Optical Computer Input Devices Has Calculated