Smee Inc. produces and sells a single product. The selling price of the product is $130.00 per unit and its variable cost is $52.00 per unit. The fixed expense is $281,580 per month. The break-even in monthly dollar sales is closest to:
A)$281,580
B)$484,943
C)$703,950
D)$469,300

Question

Quizplus · Accepted Answer

Break-even in units = fixed expenses / contribution margin per unit
Contribution margin = selling price per unit - variable cost per unit
Contribution margin per unit = $130 - $52 = $78
Break-even in units = $281,580 / $78 = 3,607.69
Therefore, the break-even in monthly dollar sales = break-even in units x selling price per unit
Break-even in monthly dollar sales = 3,607.69 x $130 = $469,300. Therefore, the closest answer is choice D.

Smee Inc Produces and Sells a Single Product