Chulo Ibsen makes and sells hand-forged wrought iron fire screens for $125 each.He has determined that his fixed costs are $8,000,and his variable costs per firescreen are $45.What is his break-even point in dollars?
A) $22,550
B) $12,500
C) $10,000
D) $8,000
E) $5,875

Question

Quizplus · Accepted Answer

The break-even point in dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is the selling price minus the variable cost per unit ($125 - $45 = $80). The contribution margin ratio is $80/$125 = 0.64. The break-even point in units is $8,000 / $80 = 100 units. In dollars, it is 100 units * $125 = $12,500.

Chulo Ibsen Makes and Sells Hand-Forged Wrought Iron Fire Screens