A company that makes optical computer input devices has calculated their revenue and costs as follows for the most recent fiscal period: Costs:
What is the break-even point in sales dollars?
A)$362 500.00
B)$589 666.67
C)$241 666.67
D)$870 000.00
E)$280 333.33

Question

A company that makes optical computer input devices has calculated their revenue and costs as follows for the most recent fiscal period:  Costs:
 What is the break-even point in sales dollars?
A)$362 500.00 
B)$589 666.67 
C)$241 666.67 
D)$870 000.00 
E)$280 333.33

Quizplus · Accepted Answer

The formula for break-even point in sales dollars is:

Break-even point = Total fixed costs / Contribution margin ratio

Total fixed costs = $1,450,000
Contribution margin ratio = ($4,000,000 - $2,550,000) / $4,000,000 = 0.3625

Break-even point = $1,450,000 / 0.3625 = $4,000,000 / 0.3625 = $11,034,482.76

Therefore, the break-even point in sales dollars is approximately $241,666.67, which is closest to option C.

A Company That Makes Optical Computer Input Devices Has Calculated