Question

A company sells children’s sleds for $70 each. The firm has variable costs per unit of $35 and total fixed costs of $120,000. What is the company’s break-even point in sales dollars? *

Answer 1

Answer:

$240,030

Explanation:

break-even point formula in units = total fixed costs / contribution margin

• total fixed costs = $120,000
• contribution margin = $70 - $35 = $35

break even point in units = $120,000 / $35 = 3,428.5 ≈ 3,429 units (we must round up)

to calculate break even point in sales dollars we multiply the break even point units by the selling price per unit = 3,429 units x $70 = $240,030