Question

Mauro Products distributes a single product, a woven basket whose selling price is $19 per unit and whose variable expense is $16 per unit. The company's monthly fixed expense is $3,000. 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.) 1. Break-even point in unit sales 2. Break-even point in dollar sales 3. Break-even point in unit sales baskets baskets Break-even point in dollar sales

Answer 1

Solution 1:

Contribution margin per unit = Selling price per unit - Variable cost per unit = $19 - $16 = $3 per unit

Monthly fixed expenses = $3,000

Break even point in unit sales = Fixed expenses / Contribution margin per unit = $3,000 / $3 = 1000 units

Solution 2:

Company's break even point in dollar sales = Breakeven point in units * Selling price per unit = 1000*$19 = $19,000

Solution 3:

New break even point in unit sales = ($3,000 + $600) / $3 = 1200 units'

New break even point in dollar sales = 1200*$19 = $22,800