Question

Check m Exercise 6-6 Break-Even Analysis [LO6-5) Mauro Products distributes a single product, a woven basket whose selling price is $27 per unit and whose variable expense is $19 per unit. The company's monthly fixed expense is $11,200 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 celculations) 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) Break-even point in uniltl sales 2. Break-even point in dollar sales 3. Break-even point in unit sales baskets Break-even point in dollar sales

Answer 1

Exercise 6 6 Required 1. Break even point in units Formula: Contribution margin/unit - Fixed Costs Contribution margin per unit Selling price/unit varible cost/unit Break even point in units $11,200 $27 $19 $11,200 $8 1400 baskets Required 2. Break even point in Dollors Formula: Selling price per unit* Break even Units $27 1400 baskets $37,800

Required 3. Fixed expenses increase by $600 Therefore , total fixed expenses 11200600 $11,800 $11,800 $11,800 Break even point in units $27 $19 $8 1475 Baskets Break even point in Dollors Selling price per unit * Break even Units $27 * 1475 Baskets $400

Exercise 6 -7 Formula to calculate Desired Profit Total Fixed Expenses + Target Profit Contribution margin per unit Required 1 $31900 + $6250 $140 $70 $38,150 $70 545 Units Required 2. $31900 + $9400 $140 $70 $41,300 $70 590 590 * $140/unit $82,600 Units

Exercise 6 -8 Required 1. Formula: Margin of Safety Actual Sales Breakeven Point Selling Price per unit Break even Point - Formula: Contribution margin/unit- Fixed Costs / Contribution margin per unit Selling price/unit varible cost/unit $9460 / ($24 - $13) Break even point in units $9,460 $11 860 Units

Margin of Safety (24 1010units) - 860 *24 $24 24240 20640 $24 3600 $24 150 Units Required 2. Margin of safety as a percentage of the Sales Formula: Actual Sales Breakeven Point Actual Sales 24240 20640 24240 3600 24240 14.9 %