Question

Hollis Company sells a single product for $20 per unit. The company's fixed expenses total $240,000...

Hollis Company sells a single product for $20 per unit. The company's fixed expenses total $240,000 per year, and variable expenses are $12 per unit of product. The company's break-even point is:

A) $400,000

B) $600,000

C) 20,000 units

D) 12,000 units

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Answer #1

Answer: B) $600,000

Explanation

Contribution margin Ratio = (Selling Price - Variable expense per unit) / Selling Price

= ($20 - $12) / 20

= 8 / 20

= 40%

Break even Point = Fixed Expenses / Contribution margin Ratio

= $240,000 / 40%

= $600,000

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