Question

Mauro Products distributes a single product, a woven basket whose selling price is $27 per unit and whose variable expense is $21 per unit. The company's monthly fixed expense is $15,600. 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

1.

Break even point in unit sales = Fixed cost / contribution margin per unit

Contribution margin per unit = Sales price - Variable cost per unit

= $27 - $21 = $6

Break even in unit sales = $15600 / $6 = 2600 Baskets.

2.

Break even point in Dollars sales = Break even units * Sales price

= 2600 Baskets * $27 = $70200.

3.

Now, Fixed cost = $15600 + $600 = $16200.

Break even point = $16200 / $6 = 2700 Baskets

Break even point in Dollars sales = 2700 Baskets * $27 = $72900.