Question

Mauro Products distributes a single product, a woven basket whose selling price is $21 per unit and whose variable expense is $16 per unit. The company's monthly fixed expense is $10,000. oints 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.) eBook baskets Print 1. Break-even point in unit sales 2. Break-even point in dollar sales Break-even point in unit sales Break-even point in dollar sales 3. baskets References

Answer 1

First question is being answered here.

For break even point, we need to calculate the contribution margin and contribution margin ratio.

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

Contribution margin per unit = $21 - $16 = $5

Contribution margin ratio = Contribution margin per unit / Selling price per unit * 100

Contribution margin ratio = $5 / $21 * 100 = 0.238095 or 23.81%

Now, we will calculate the break even point.

1. Break even point in unit sales = Fixed cost / Contribution margin per unit

Putting the values in the above formula, we get,

Break even point in unit sales = $10000 / $5 = 2000 baskets

2. Break even point in dollar sales = Fixed cost / Contribution margin ratio

Putting the values in the above formula, we get,

Break even point in dollar sales = $10000 / 0.238095 = $42000

3. If fixed expenses increase by $600, then new fixed expenses will be $10600.

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

Putting the values in the above formula, we get,

Break even point in unit sales = $10600 / $5 = 2120 baskets

Break even point in dollar sales = Fixed cost / Contribution margin ratio

Putting the values in the above formula, we get,

Break even point in dollar sales = $10600 / 0.238095 = $44520