Question

Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company’s fixed expenses are $10,000. What is the company’s break-even point in sales dollars?

Answer 1

Answer:

$25,000

Explanation:

The computation of the  break-even point in sales dollars is shown below:

Break even point = (Fixed expenses) ÷ (Profit volume Ratio)  

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit  

= $100 - $60

= $40

And, Profit volume ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100

So, the Profit volume ratio = ($40) ÷ ($100) × 100 = 40%

And, the fixed expenses is $10,000

Now put these values to the above formula  

So, the value would equal to  

= ($10,000) ÷ (40%)  

= $25,000