Mauro Products distributes a single product, a woven basket whose selling price
ID: 2459674 • Letter: M
Question
Mauro Products distributes a single product, a woven basket whose selling price is dollar 17 and whose variable expense is dollar 14.96 per unit. The company's monthly fixed expense is dollar 3,672. Required: Solve for the company's break-even point in unit sales using the equation method. (Do not round your intermediate calculations.) 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 unit sales using the formula method. (Do not round your intermediate calculations.) 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
Mauro Products All Amounts in $ 1. Breakeven point in unit sales is where sales value = costs Let us assume the number of units required to break even as X Hence, 17X = 14.96X + 3,672 Therefore, 2.04X = 3,672 or X = 1800 baskets 2. Contribution Margin Ratio, based on the information given Sales 17 Variable Costs 14.96 Contribution Margin 2.04 Contribution Margin Ratio 12% We need to obtain a sales value where the Contribution Margin Ratio = Fixed Costs Assuming the quantity sold as X 0.12X = 3,672 or X = 30600 baskets Hence, the break even point in dollar sales will be 30,600 X $ 17 = 520200 $ 3. Using the formula method, let us assume the quantity sold for break even as X The answer for the formula method will be the same as the equation method viz. 1,800 baskets. 4. The answer for the formula method using the contribution margin ratio will be 12% and $ 520,200 in terms of dollar sales.