1. Break-even point in unit sales = Fixed expense / Contribution Margin per unit
Contribution Margin per unit = Selling price – Variable cost per unit
= $26 - $21
= $5 per unit
Therefore, Break-even point in unit sales = $7,000 / $5 per unit
= 1,400 baskets
2. Break-even point in dollar sales = Fixed expense / Contribution margin ratio
Contribution margin ratio = Contribution Margin per unit / Selling price
= 5 / 26
= 19.23 %
Therefore, Break-even point in dollar sales = 7,000 / 19.23%
= $36,401
3. If the company’s Fixed expenses increase by $600:
New Break-even point in unit sales = Fixed expense / Contribution Margin per unit
= (7,000 + 600) / 5
= 1,520 baskets
New Break-even point in dollar sales = Fixed expense / Contribution margin ratio
= (7,000 + 600) / 19.23%
= $39,522
Mauro Products distributes a single product, a woven basket whose selling price is $26 per unit...
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