C is corrent because breakeven is calculated by dividing fixed costs by the contribution margin percentage. The contribution margin percentage is equal to 75% (100% – 25% variable cost percentage). Therefore, breakeven is equal to $40,000 ($30,000 ÷ 75%).
A is incorrect because it is inappropriately calculated as fixed costs divided by 125%.
B is incorrect because it is inappropriately calculated as fixed costs divided by the variable cost percentage.
D is incorrect because this is the amount of the fixed costs.
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