Mauro Products distributes a single product, a woven basket whose selling price
ID: 2423077 • Letter: M
Question
Mauro Products distributes a single product, a woven basket whose selling price is $21 and whose variable expense is $15.12 per unit. The company’s monthly fixed expense is $9,408.
Solve for the company’s break-even point in dollar sales using the equation method and the CM ratio.(Do not round intermediate calculations. Round "CM ratio percent" to nearest whole percent.)
Solve for the company’s break-even point in dollar sales using the formula method and the CM ratio.(Do not round intermediate calculations. Round "CM ratio percent" to nearest whole percent.)
Mauro Products distributes a single product, a woven basket whose selling price is $21 and whose variable expense is $15.12 per unit. The company’s monthly fixed expense is $9,408.
Explanation / Answer
1.
We have,
p = $21
v = $15.12, and
FC = $9,408
Substituting the known values into the formula for breakeven point in sales units, we get:
Breakeven Point in Sales Units (x)
= 9,408 ÷ (21 15.12)
= 9,000 ÷ 5.88
= 1,531 units
Break-even Point in Sales Dollars = $21 × 1,531 = $32,151.
2. Contribution margin perunit=Sales price perunit-Variable expense per unit
=21-15.12
= $5.88
Contribution margin ratio = contribution margin/sales
=5.88/21
=28%
Break even point in sales dollars=Total fixed expenses/contribution margin ratio
=9,408/.28
=$33,600
3. Sales = Variable expenses + Fixed expenses + Profit
$21Q = $15.12Q + $9,408 + $0
$21Q-$15.12Q = $9,408
Q = $9,408 /$5.88
Q = 1600 Units
Breakeven point in dollar sales=1600 units*$21
=$33,600