Question

Mauro Products distributes a single product, a woven basket whose selling price is $24 per unit and whose variable expense is $21 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.)

Answer 1

Break even point in unit sales = Fixed cost/Contribution margin per unit = 4200/(24-21) = 1400

Breakeven point in dollar sales = 1400*24 = 33,600

Breakeven point = (4200+600)/3 = 1600

Breakeven point in dollar sales = 1600*24 = 38,400