Mauro Products distributes a single product, a woven basket whose selling price
ID: 2425530 • Letter: M
Question
Mauro Products distributes a single product, a woven basket whose selling price is $25 and whose variable expense is $19.25 per unit. The company’s monthly fixed expense is $17,250.
Required: 1. Solve for the company’s break-even point in unit sales using the equation method. (Do not round your intermediate calculations.)
2. 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.)
3. Solve for the company’s break-even point in unit sales using the formula method. (Do not round your intermediate calculations.)
4. 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.)
Explanation / Answer
1. selling price = $25
variable cost = $19,25
contribution = sales - variable cost
= $5.75
fixed cost = $17250
Break even point in unit sales = fixed cost / contirbuition
= $17250 / $5.75
= 3000 units
2. contribution margin = contribution /selling price *100
= $5.75 / 25*100
= 23%
break even sales in units = fixed cost / contribution margin
= $17250 / 0.23
= $75000
3. breakeven point in units = $17250/ (25- 19.25) = 3000 units
4. breakeven point in dollar sales = 17250 / (100 - 77)%
= 17250/ 23%
= 75000