Dania Beach monthly fixed overhead is $214,000 and expected gross margin is 25% of sales. What monthly sales volume breaks even?
Correct Answer
D) $856,000
Break-even sales equal fixed overhead divided by the gross margin rate.
Why This Is the Correct Answer
Break-even sales equal fixed overhead divided by the gross margin rate.
Why the Other Options Are Wrong
Option A: $770,400
$770,400 is below the supported result for break-even sales; it likely uses the wrong base, period, or account bucket.
Option B: $941,600
$941,600 is above the supported result for break-even sales; it likely adds an unsupported amount or compares the wrong financial base.
Option C: $764,286
$764,286 is below the supported result for break-even sales; it likely uses the wrong base, period, or account bucket.
Memory Technique
Two shelves for break-even sales: cost side first or price side first.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section One, Planning for Profits, The Relationship Between Volume and Profit; use the job ledger figures in the stem and recompute the same accounting measure.
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