Question

Eva Company sells one product at a price of $30 per unit. Variable expenses are 30 percent of sales, and fixed expenses are $35,000. Tax rate is 30%. The sales dollars level required to break even for Eva are:

A. $50,010
B. $41,667
C. $2,000
D. $60,000

Answer 1

Answer:

A. $50,010

Explanation:

The break even point is the activity level where the total sales is equal to the total costs. The costs are the variable and fixed costs.

Both the total sales and total variable costs are affected by the level of activities, however, the fixed cost is not.

Sales less variable cost also gives the contribution margin.

let the number of units that must be sold t break even be y

0.7 (30y - (30y × 0.3) - 35,000) = 0

0.7 being the value of the income less the income tax given that the tax rate applicable is 30%.

21y = 35,000

y =  35000/21

= 1,667 unit

Break even sales

= $30 × 1667

= $50,010

Answer 2

Answer: A. $50, 010

Explanation:

GIVEN THE FOLLOWING ;

PRICE PER UNIT =$30

FIXED COST = $35,000

VARIABLE COST = 30% OF SELLING PRICE PER UNIT

THEREFORE ;

VARIABLE COST = 0.3 × 30 = $9

SALES DOLLAR TO BREAK EVEN =?

Break even point (sales dollars) =

(fixed cost ÷ contribution margin) × sales price

Break even point, point at which there is no net profit or loss in a business output.

Contribution margin = price per unit - variable cost

Contribution margin = $30 - $9 =$21

($35,000 ÷$21) × $30

1667 units × $30 = $50,010