Question

Mauro Products distributes a single product, a woven basket whose selling price is $19 per unit and whose variable expense is $15 per unit. The company's monthly fixed expense is $8,800. 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.) baskets 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

Answer- 1)- Break-even point in unit sales=2200 units.

Explanation- Break-even point in unit sales= Fixed costs/ Contribution margin per unit

= $8800/($19 per unit-$15 per unit)

= $8800/$4 per unit

= 2200 units

2)- )- Break-even point in dollar sales=$41800.

Explanation- Break-even point in unit sales= Fixed costs/ Contribution margin ratio

= (Fixed costs+ Target profit)/Contribution margin ratio

= $8800/21.052631578%

= $41800

Where- Contribution margin ratio= (Contribution margin per unit/Selling price per unit)*100

= ($4 per unit/$19 per unit)*100

= 21.052631578%

3)- New break-even point in unit sales=2350 units.

Explanation- Break-even point in unit sales= Fixed costs including increased fixed costs/ Contribution margin per unit

= ($8800+$600)/($19 per unit-$15 per unit)

= $9400/$4 per unit

= 2350 units

New Break-even point in dollar sales=$44650.

Explanation- Break-even point in unit sales= Fixed costs including increased fixed costs / Contribution margin ratio

= Fixed costs/Contribution margin ratio

= ($8800+$600)/21.052631578%

= $44650