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 $12 per unit. The company's monthly fixed expense is $4,200 Required: 1. Calculate the company's break-even point in unit sales. 2 Calculate the company's break-even point in dollar sales 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? Answer is complete but not entirely correct. Break-even point in unit sales Break-even point in dollar sales 3. Break-even point in unit sales ,400baskets 2 S 21,000 Break-even point in dollar sales ,200 baskets 21.000 0

Explanation / Answer

Solution :

Part 3 . If the company fixed expenses increase by $600, the revised fixed cost would be $4,800.

Contrinution per unit = Sleeing price per unit less variable cost per unit = 15-12 = 3 per unit

Hence, the Break-even point in unit sales = revised fixed cost / contribution per unit = 4800/3 = 1,600 baskets

Break even point in dollar sales = 1,600 * 15 (selling price per unit) = $24,000

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