Atlas Company sells only one product at a regular price of $10.00 per unit.Variable expenses are 70% of sales, and fixed expenses are $50,000.Management has decided to decrease the selling price to $9.00 in the hope of increasing its volume of sales.What is the sales dollars level required to break even at the old price of $10.00? (Note: Round answer to two decimal places.)
A) $166,666.67
B) $126,000.50
C) $180,000.30
D) $150,000.25

Question

Quizplus · Accepted Answer

SUPPORTING CALCULATIONS:
Unit Contribution Margin = Price - Unit Variable Cost
Unit contribution margin = [$10.00 - ($10.00 × 70%)] = $10.00 - $7.00 = $3.00
Contribution Margin Ratio = Unit Contribution Margin / Price
Contribution margin ratio = $3.00 / $10.00 = 0.30
Break-Even Sales = Total Fixed Expenses / Contribution Margin Ratio
Break-even sales = $50,000 / 0.30 = $166,666.67

Atlas Company Sells Only One Product at a Regular Price