Device Nation Pty's fixed costs are $200 000 and variable costs are 60% of the selling price. What is Device Nation Pty's break-even point in sales dollars?

Question

BlackTom AI · Accepted Answer

Break-even sales equals fixed costs divided by the contribution margin ratio (CM ratio). The CM ratio is the portion of each sales dollar remaining after variable costs that contributes to covering fixed costs and profit.

Relevant knowledge points:
- Fixed costs are constant in total ($200,000).
- Variable costs are given as 60% of selling price → variable cost ratio = 0.60.
- Contribution margin ratio = 1 − variable cost ratio = 1 − 0.60 = 0.40 (40%).
- Break-even sales dollars = Fixed costs ÷ Contribution margin ratio.

Step-by-step reasoning and calculations:
1. Compute contribution margin ratio:
   CM ratio = 1 − 0.60 = 0.40 (or 40%).
2. Apply the break-even formula:
   Break-even sales = Fixed costs / CM ratio
   = $200,000 / 0.40
3. Divide:
   $200,000 ÷ 0.40 = $200,000 ÷ 0.4 = $500,000.

Why this is correct:
- At $500,000 in sales, variable costs are 60% of sales = 0.60 × $500,000 = $300,000.
- Contribution margin at that sales level = Sales − Variable costs = $500,000 − $300,000 = $200,000.
- That contribution margin exactly equals the fixed costs ($200,000), so profit = 0 and the firm is at break-even.

Why the other options are incorrect:
- $200,000: equals fixed costs but ignores that sales must be higher to cover variable costs; not a sales figure that yields zero profit.
- $333,333: equals $200,000 ÷ 0.60; this would be the result if one mistakenly divided fixed costs by the variable-cost ratio rather than the contribution margin ratio.
- $800,000: equals $200,000 ÷ 0.25; this would imply using a 25% CM ratio (incorrect given the 40% CM ratio here).

Conclusion: The break-even point in sales dollars is $500,000, which matches the provided correct answer.

Device Nation Pty's fixed costs are $200 000 and variable costs are 60% of the selling price. What is Device Nation Pty's break-even point in sales dollars?单项选择题

类似问题

EA 7 - If they purchase the machine, the number of units needed to breakeven will

Break-even for a multiple product firm ________.

When sales price decreases and all other variables are held constant, the break-even point will ________.

Barb’s Best Pies sells a meat pie for $5.00. Variable costs are $3.00 per unit and fixed costs for the period are $4,000. What is the profit (loss) based on the sales volume at 1,000 pies?

Breakeven point is best defined as total revenue equal to

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents the

If calculations show that the break-even point is too high for the period, which of these is not a possible course of action?

A firm is considering a new project with estimated depreciation of $1,000, fixed costs of $3,600, and total sales of $8,146 at the accounting break-even level. The variable costs per unit are estimated at $5.61. What is the accounting break-even level of production?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单