If a product has a selling price of $100, variable costs of $60, and fixed costs

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What’s inside this PDF?

Question: If a product has a selling price of $100, variable costs of $60, and fixed costs of $10, what is the break-even point in sales dollars?

Options:

$1000
$2000
$5000
$3000

Correct Answer: $3000

Solution:

Break-even point in sales dollars = Fixed Costs / Contribution Margin Ratio. Contribution Margin = Selling Price - Variable Costs = $100 - $60 = $40. Contribution Margin Ratio = $40 / $100 = 0.4. Break-even Sales = $10 / 0.4 = $25. Therefore, Break-even point in sales dollars = $25 * $100 = $3000.

If a product has a selling price of $100, variable costs of $60, and fixed costs

Practice Questions

If a product has a selling price of $100, variable costs of $60, and fixed costs of $10, what is the break-even point in sales dollars?

$1000
$2000
$5000
$3000

Questions & Step-by-Step Solutions

If a product has a selling price of $100, variable costs of $60, and fixed costs of $10, what is the break-even point in sales dollars?

Step 1: Identify the selling price of the product, which is $100.
Step 2: Identify the variable costs associated with the product, which are $60.
Step 3: Calculate the contribution margin by subtracting variable costs from the selling price: $100 - $60 = $40.
Step 4: Calculate the contribution margin ratio by dividing the contribution margin by the selling price: $40 / $100 = 0.4.
Step 5: Identify the fixed costs, which are $10.
Step 6: Calculate the break-even point in sales dollars by dividing fixed costs by the contribution margin ratio: $10 / 0.4 = $25.
Step 7: To find the break-even point in sales dollars, multiply the break-even sales by the selling price: $25 * $100 = $2500.

Break-even Analysis – Understanding how to calculate the break-even point using fixed costs, variable costs, and selling price.
Contribution Margin – Calculating the contribution margin to determine how much revenue contributes to covering fixed costs.
Contribution Margin Ratio – Understanding the ratio of contribution margin to selling price to find the break-even point in sales dollars.

If a product has a selling price of $100, variable costs of $60, and fixed costs

What’s inside this PDF?

If a product has a selling price of $100, variable costs of $60, and fixed costs

Practice Questions

Questions & Step-by-Step Solutions

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