Mauro Products distributes a single product, a woven basket whose selling price is $21 per unit and whose variable expense is $18 per unit. The company’s monthly fixed expense is $4,200.
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.)
Contribution margin=Sales-Variable cost
=(21-18)=$3 per unit
a.Breakeven=Fixed expenses/Contribution margin
=(4200/3)=1400 units
b.Breakeven=(1400*21)=$29400
c.New fixed expenses=(4200+600)=$4800
Hence new breakeven=(4800/3)=1600 units
=(1600*21)=$33600
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