A product has a selling price of $50 and variable costs of $30. If fixed costs are $100,000, what is the break-even sales revenue?

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Q: A product has a selling price of $50 and variable costs of $30. If fixed costs are $100,000, what is the break-even sales revenue?

Solution: Break-even sales revenue = Fixed costs / Contribution margin ratio = $100,000 / (($50 - $30) / $50) = $100,000 / 0.4 = $250,000

Steps: 6

Step 1: Identify the selling price of the product, which is $50.
Step 2: Identify the variable costs of the product, which are $30.
Step 3: Calculate the contribution margin by subtracting variable costs from the selling price: $50 - $30 = $20.
Step 4: Calculate the contribution margin ratio by dividing the contribution margin by the selling price: $20 / $50 = 0.4.
Step 5: Identify the fixed costs, which are $100,000.
Step 6: Calculate the break-even sales revenue by dividing fixed costs by the contribution margin ratio: $100,000 / 0.4 = $250,000.