Maxson Products distributes a single product, a woven basket whose selling price
ID: 2395976 • Letter: M
Question
Maxson Products distributes a single product, a woven basket whose selling price is $19 and whose variable cost is $15.96 per unit. The company’s monthly fixed expense is $9,120.
6.
value:
12.50 points
Required information
Exercise 3-7 Part 1 and 2
Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.)
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7.
value:
12.50 points
Required information
Exercise 3-7 Part 3 and 4
Compute for the company’s break-even point in sales dollars using formula method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.)
Required: 1. Compute for the company’s break-even point in unit sales using the equation method.
Explanation / Answer
1.Break even point in equation method
Sales = Variable cost + Fixed cost + profit
Since profit is 0 at break even point
x be the break even sales(units)
Sales = Variable cost + Fixed cost
$19 *x = $15.96*x + $9,120
x =$9,120/3.04
= 3000 units
2. Break even point in sales($)= 3000 units* $19 = $57000
CM RATIO = $3.04/$19 *100
= 0.16
3.Break even point = Fixed costs/contribution per unit
= $9120/$3.04
= 3000 units
4. Break even point in sales($)= 3000 units* $19 = $57000
CM RATIO = $3.04/$19 *100
= 0.16