North Company sells a single product. The product has a selling price of $30 per unit and variable expenses of 70% of sales. If the company’s fixed expenses total $60,000 per year, then it will have a break-even of:
a. $60,000
b. $85,714
c. $42,000
Selected: d. $200,000 This answer is correct.
Correct! Contribution margin ratio equals 1 – variable expense ratio equals 70 percent less 30 percent. Break-even in total sales dollars = Fixed expenses divided by Contribution margin ratio equals $60,000 divided by 30 percent equals $200,000.