Question

The sweet factory produces and sells specialty fudge. the selling price per pound is $20, variable costs are $12 per pound, and total fixed costs are $6,000. what are breakeven sales in dollars? select one:
a. $9,000
b. $3,750
c. $750
d. $15,000

Answer 1

Price = $20
Variable cost = $12

Therefore the contribution margin = price - variable cost = 20 - 12 = $8.
The contribution margin is used to pay the total fixed costs. Since these costs equal $6000, the factory needs to sell the following amount of products:
$\frac{6,000}{8} =750$

Therefore, the total break-even revenue = price * break-even amount = 20 * 750 = $15,000

Hence, the correct answer is D. $15,000