Unit sales price $40
Variable production costs 15
Fixed production costs $8000
Selling and Administrative costs $4000 + 10% of sales
Given the above information the break-even point in sales dollars is:

Question

Quizplus · Accepted Answer

The break-even point in sales dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is $40 - $15 = $25. The contribution margin ratio is $25/$40 = 0.625. Total fixed costs are $8000 + $4000 = $12000. Break-even sales = $12000 / 0.625 = $19,200.

Unit Sales Price $40