Question

Atlas Company sells only one product at a regular price of $10.00 per unit. Variable expenses are 70% of sales, and fixed expenses are $50,000. Management has decided to decrease the selling price to $9.00 in the hope of increasing its volume of sales. What is the sales dollars level required to break even at the old price of $10.00? (Note: Round answer to two decimal places.)

	A.	$166,666.67
	B.	$126,000.50
	C.	$180,000.30
	D.	$150,000.25

Answer 1

Correct answer---(A) $166,666.67

Sale Price per unit	$ 10.00
CM Ratio	30%
Unit Variable cost	$   7.00
Contribution margin	$ 3.00

A	Fixed Cost	$       50,000.00
B	Contribution margin	$   3.00
C=A/B	Break Even point in Unit Sales [Answer 2(a)]	$       16,666.67
D	CM Ratio	30%
E=A/D	Break even point in dollar sales [Answer 2(b)]	$ 166,666.67