Question

If fixed costs are $300,000, the unit selling price is $75, and the unit variable costs...

If fixed costs are $300,000, the unit selling price is $75, and the unit variable costs are $45.  What is the break-even sales in sales dollars?

A. $300,000 B. $450,000 C. $1,125,000 D. $750,000

show me the correct steps to get this answer, please.

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Answer #1
Answer: Option D. $ 750,000
Calculation of break-even sales in sales dollars is as follows:
Break-even sales in sales dollars = Fixed cost / Contribution margin ratio
= $ 300,000 / 40%
= $ 750,000
Thus, Break-even sales in sales dollars is $ 750,000
Working note:
Contribution margin ratio = ( Contribution margin per unit / Selling price per unit ) * 100
=( $ 30 / $ 75 ) * 100
= 40%
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $ 75 - $ 45
= $ 30
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