Question

Exercise 5-6 Break-Even Analysis (LO5-5) Mauro Products distributes a single product, a woven basket whose selling price is $21 per unit and whose variable expense is $15 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.) 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

Contribution margin=Sales-Variable cost

=(21-15)=$6 per unit

Current Breakeven=Fixed expenses/Contribution margin

=7800/6=1300 baskets

=(1300*21)=$27300

New fixed cost=(7800+600)=$8400

Hence new breakeven=(8400/6)=1400 baskets

=(1400*21)=29400

Breakeven point in unit sales	1300 baskets
Breakeven point in dollar sales	$27300
Breakeven point in unit sales	1400 baskets
Breakeven point in dollar sales	$29400