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A product sells for $135 per unit, and its variable costs are 60% of sales. The fixed costs are $428,000. What is the break-even point in sales dollars? (Do not round intermediate calculations.)

Respuesta :

Answer:

$1,070,000.00

Explanation:

Break Even Point in Sales = Fixed Cost/ Contribution Margin Ratio

In case contribution margin is taken as a percentage then straight calculation can be done.

Since variable cost = 60%, contribution margin ratio = Sales - Variable costs = 40%

Break even point in sales = $428,000.00 / 40% = $1,070,000.00

Alternatively it can be calculated by taking contribution per unit, for this

Contribution per unit = Sales Value - Variable cost = $135 - 60% = $54

BEP in units = $428,000 / $54 = 7,925.925 units

BEP in sales = BEP in units X Selling price per unit = 7,925.925 X $135 = $1,069,999.875

Thus value in both cases is same the difference is of rounding off.

$1,070,000.00

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