Question

1.25 points eBook HintPrintReferences Check my work Check My Work button is now enabledItem 5Item 5 1.25 points Mauro Products distributes a single product, a woven basket whose selling price is $25 per unit and whose variable expense is $18 per unit. The company’s monthly fixed expense is $11,200. 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.)

Answer 1

1. Break-even point in unit sales = Fixed expense / Contribution margin per unit

Break-even point in unit sales = $11,200 / ($25 - $18)

Break-even point in unit sales = 1,600 units

2. Break-even point in dollar sales = 1,600 units × $25 = $40,000

3. New break-even point in unit sales = New fixed expense / Contribution margin per unit

New break-even point in unit sales = ($11,200 + $600) / ($25 - $18)

New break-even point in unit sales = 1,686 units

Nreak-even point in dollar sales = 1,686 units × $25 = $42,143