Answer:
The company's break-even point in sales dollars is A. $25,000
Explanation:
The break-even point is the level of production at which the costs of production equal the revenues for a product and calculated by using following formula:
Break-even point in units = Fixed expense/(Selling price per unit-Variable expense per unit) = $10,000/($100-$60) = $10,000/$40 = 250 units
Break-even point in sales dollars = Break-even point in units x Selling price per unit = 250 x $100 = $25,000
Answer:
A. $25,000
Explanation:
Break even point is the level of production at which the costs incurred in production equal the revenues for a product and calculated by using following formula;
Break-Even Point (sales dollars) = Fixed Costs ÷ Contribution Margin ratio
where,
Contribution Margin ratio = (selling Price – Variable Costs)/selling price
Given;
Selling price per unit = $100
variable cost per unit = $60
Fixed cost = $10,000
Contribution margin ratio = ($100 - $60)/$100
= 0.4
Break-Even Point (sales dollars) = $10,000/0.4
= $25,000
