Mauro Products distributes a single product, a woven basket whose selling price

Question

Mauro Products distributes a single product, a woven basket whose selling price is $25 per unit and whose variable expense is $21 per unit. The company's monthly fixed expense is $4,000. 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.f the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (D not round intermediate calculations.) 1 Break-even point in unit sales 2. Break-even point in dollar sales 3. Break-even point in unit sales baskets baskets Break-even point in dollar sales

Explanation / Answer

Answer to Requirement 1.

Break Even Point in Unit Sales = Fixed Cost / Contribution Margin per Unit
Contribution Margin per Unit = Selling Price per Unit – Variable Cost per Unit
Contribution Margin per Unit = $25 - $21
Contribution Margin per Unit = $4

Break Even Point in Unit Sales = 4,000 / 4
Break Even Point in Unit Sales = 1,000 Baskets

Answer to Requirement 2.

Break Even Point in Dollar Sales = Fixed Cost / Contribution Margin Ratio
Contribution Margin Ratio = Contribution Margin per Unit / Selling Price per unit * 100
Contribution Margin Ratio = 4/ 25 * 100
Contribution Margin Ratio = 16%

Break Even Point in Dollar Sales = 4,000 / 0.16
Break Even Point in Dollar Sales = $25,000

Answer to Requirement 3.

Proposed Fixed Cost = $4,000 + $600 = $4,600

Break Even Point in Unit Sales = Fixed Cost / Contribution Margin per Unit
Contribution Margin per Unit = $4
Break Even Point in Unit Sales = 4,600 / 4
Break Even Point in Unit Sales = 1,150 Baskets

Break Even Point in Dollar Sales = Fixed Cost / Contribution Margin Ratio
Break Even Point in Dollar Sales = 4,600 / 0.16
Break Even Point in Dollar Sales = $28,750

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---