A firm with 60% of sales going to variable costs,$1.5 million fixed costs,and $500,000 depreciation and sales of $3 million.How does the current level of sales compare to the accounting break-even sales level?
A) Current sales are $2 million below the break-even level.
B) Current sales are $333,333 below the break-even level.
C) Current sales are $800,000 below the break-even level.
D) Current sales exceed the break-even level by $360,000.

Question

Quizplus · Accepted Answer

Accounting B / E = ($1.5m + 0.5m) / (1 − 0.60) = $5m; Current sales are $2 million below the break-even level.

A Firm with 60% of Sales Going to Variable Costs,$1