Sutton Company produces head sets for computers, which it sells for $20 each. Th

Question

Sutton Company produces head sets for computers, which it sells for $20 each. The variable cost to make each head set is $6. During April, 700 sets were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Sutton Company?

A $100 B $2,000 C $7,000 D $4,200 A $100 B $2,000 C $7,000 D $4,200 Sutton Company produces head sets for computers, which it sells for $20 each. The variable cost to make each head set is $6. During April, 700 sets were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Sutton Company?

A $100 B $2,000 C $7,000 D $4,200

Explanation / Answer

CM per unit = (selling price) 20 - (variable cost) 6 = 14

Selling price per unit = 20

Fixed cost = 1400

Break-even level of sales in dollars = (Fixed cost / CM per unit) * selling price

1400/14 = 100 * 20 = $2,000   

B $2,000

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