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 $15 per unit and whose variable expense is $13 per unit. The company’s monthly fixed expense is $3,600.

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.)

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

1. Break-even point in unit sales = Fixed expenses / (Selling expense - Variable cost) = $3,600 / ($15 - $13) = 1,800 baskets

2. Break-even point in dollar sales = 1,800 baskets * $15 = $27,000

3. Break-even point in unit sales = Fixed expenses / (Selling expense - Variable cost) = ($3,600 + $600) / ($15 - $13) = 2,100 baskets

Break-even point in dollar sales = 2,100 baskets * $15 = $31,500

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