Question

Exercise 5-6 Break-Even Analysis [LO5-5]

Mauro Products distributes a single product, a woven basket whose selling price is $22 per unit and whose variable expense is $19 per unit. The company’s monthly fixed expense is $7,800.

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.)

1.Break-even point in unit sales_________ baskets

2.Break-even point in dollar sales_______

3.Break-even point in unit sales_______ baskets

Break-even point in dollar sales________

Answer 1

Solution

1	Breakeven point in unit sales	2600	Baskets
2	Breakeven point in dollars sales	$ 57,200.00
3	Breakeven point in unit sales	2800	Baskets
	Breakeven point in dollars sales	$ 61,600

Working for requirement 1 and 2

A	Sale Price per unit	$                  22.00
B	Variable Cost per Unit	$                  19.00
C=A x B	Unit Contribution	$                    3.00
D	Total Fixed cost	$            7,800.00
E=D/C	Breakeven point in units	2,600
F= E x A	Breakeven in sales dollars	$                57,200

Working for requirement 3

A	Sale Price per unit	$              22.00
B	Variable Cost per Unit (87+22)	$              19.00
C=A x B	Unit Contribution	$                3.00
D	Total Fixed cost	$        8,400.00
E=D/C	Breakeven point in units	2800.00
F= E x A	Breakeven in sales dollars	$      61,600.00