Question

Mauro Products distributes a single product, a woven basket whose selling price is $23 per unit and whose variable expense is $20 per unit. The company's monthly fixed expense is $5,100. Dints 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.) eBook Hint Print baskets References 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

4.

1.break even point in units=fixed cost/contribution per unit

contribution=sales price-variable cost per unit=23-20=3

break even point=5100/3=1700 units

2.break even point in dollar sales=fixed cost/pv ratio,pv ratio=contribution/sale

pv ratio=3/23,hence break even point in dollar sales=5100/3/23=$39100

3.if fixed expenses increased by 600,then fixed cost =5100+600=5700

so,break even point in units sales=5700/3=1900 units

break even point in dollar sales=5700/3/23=$43700

5.

1.profit=sale-variable cost-fixed costs,if profit need=7900,then substitute the values in the given equation,and assume that the unit to be sold is "n",we will get

7900=140xn-70xn-32350,ie 70n=7900+32350=40250,and n=40250/70=575.hence 575 units shoul sell to achieve a profit of 7900.

2.we know that profit=sale-variable cost-fixed cost,if required profit is $8500,assume n number of units sold,then

8500=140n-70n-32350 ie,70n=32350+8500=40850 and dollar sales required to achieve a profit of 8500 is (40850/70)*140=$81700

6.

1.MARGIN OF SAFETY=profit/pv ratio

profit=sale-variable cost-fixed cost=1040*25-1040*19-5340=900

pv ratio=contribution/sale=25-19/25=24%,

margin of safety=900/24%=$3750

2.margin of safety as % of sales=margin of safety/sales=3750/1040*25=14.42%