Question

Kaplan, Inc. produces flash drives for computers, which it sells for $27 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan? Select one:
a. $100
b. $2,700
c. $14,000
d. $8,400

Answer 1

Answer:

Break even sales will be $2700

So option (b) will be correct option

Explanation:

We have given fixed cost = $1400

Sells per unit = $27 each

And variable cost per unit = $13 each

So contribution margin ratio $=\frac{sales\ per\ unit-variable\ cost\ perunit}{sales\ per\ unit}=\frac{27-13}{27}=0.5185$

We know that break even sales is given by

Break even sales $=\frac{fixed\ cost}{contribution\ margin\ ratio}=\frac{1400}{0.5185}= 2700$

So option (b) will be correct answer