Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 45 percent and total fixed costs of $6,875. What is the break-even point in sales dollars for Biscuit Company?
A)$2,750
B)$3,125
C)$6,875
D)$12,500

Question

Quizplus · Accepted Answer

The break-even point in sales dollars can be calculated using the formula: Break-even point = Total Fixed Costs / (1 - Variable Cost Ratio). Given that the total fixed costs are $6,875 and the variable cost ratio is 45%, the calculation is $6,875 / (1 - 0.45) = $6,875 / 0.55 = $12,500.

Biscuit Company Sells Its Product for $50