Mauro Products distributes a single product, a woven basket whose selling price is $27 per unit and whose variable expense is $19 per unit. The company’s monthly fixed expense is $10,400.
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.)
Selling price per unit = $27
Variable cost per unit = $19
Fixed cost = $10,400
Contribution margin per unit = Selling price per unit - Variable cost per unit
= 27 - 19
= $8
1.
Break even point in units = Fixed cost/Contribution margin per unit
= 10,400/8
= 1,300
2.
Break even point sales dollar = Break even point in units x Selling price per unit
= 1,300 x 27
= $35,100
3.
Fixed expenses increased by $600
New fixed expense = 10,400 + 600
= $11,000
New Break even point in units = New fixed expense/Contribution margin per unit
= 11,000/8
= 1,375
New Break even point sales dollar = New Break even point in units x Selling price per unit
= 1,375 x 27
= $37,125
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