Answered: Variable expenses for Delta Corporation…

Variable expenses for Delta Corporation are 40% of sales. What are sales at the break-even point, assuming that fixed expenses total $150,000 per year: O $250,000 $375,000 $600,000 $150,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Variable expenses for Delta Corporation are 40% of sales. What are sales
at the break-even point, assuming that fixed expenses total $150,000 per
year:
$250,000
$375,000
$600,000
$150,000

Expert Solution

Step 1

The break-even point is the point beyond which there are only profits. It is the point where the contribution is equal to fixed costs, which means all the fixed costs are written off completely against the contribution and there are no profits or losses at the break-even point and only profits after this point. And contribution is calculated by deducting variable costs from the sales or takes as equal to the value of fixed costs for calculation purposes.

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