Question

Mauro Products distributes a single product, a woven basket whose selling price is $24 per unit and whose variable expense is $18 per unit. The company's monthly fixed expense is $6,000. Required: 1. Calculate the company's break-even point in unit sales. 2. Calculate the company's break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.) baskets 1. Break-even point in unit sales 2. Break-even point in dollar sales 3. Break-even point in unit sales Break-even point in dollar sales baskets

Answer 1

1.

Breakeven point in units = Fixed cost/Contribution margin per unit = 6,000/(24-18) = 1,000 baskets

Breakeven point in dollar sales = 1,000 * 24 = 24,000

Breakeven point = (Fixed costs+target profit)/Contribution margin per unit = (6,000+600)/6 = 1100

Breakeven point in dollar sales = 1100 * 24 = 26,400

.

.

Breakeven sales = Fixed cost/Contribution per unit

= 8,800/10 = 880 units

Margin of Safety = Sales - Breakeven sales = 1030 - 880 = 150

Margin of Safety in dollars = 150*24 = 3600

Margin of Safety percent = 150/1030 = 14.56%