Question

Mauro Products distributes a single product, a woven basket whose selling price is $10 per unit and whose variable expense is $7 per unit. The company's monthly fixed expense is $4,500. 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 :

Contribution margin = sales - variable cost

= (10-7) = $3 per unit

Break even point = Fixed cost / Contribution margin

= (4500/3) = 1500 baskets

= (1500*10) = $15,000

New fixed cost = (1500 + 600) = 2100

Hence new break even point = (2100/3) = 6300 baskets

= (6300*10) = $63,000

Break -even point	1500 baskets
Break - even point in dollar sales	15,000
Break - even point in unit sales	2100 baskets
Break - even point in dollar sales	63,000