Mauro Products distributes a single product, a woven basket whose selling price
ID: 2536764 • Letter: M
Question
Mauro Products distributes a single product, a woven basket whose selling price is $21 and whose variable expense is $16.8 per unit. The company's monthly fixed expense is $7,560 1. Solve for the company's break-even point in unit sales using the equation method. (Do not round your intermediate calculations.) Break-even point in unit sales1,800 baskets 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.) CM ratio 2 % Break-even point in dollar sales 37,800 3. Solve for the company's break-even point in unit sales using the formula method. (Do not round your intermediate calculations.) Break-even point in unit sales 1,800 baskets 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.) CM ratio Break-even point in dollar sales 201 % 37,800Explanation / Answer
Answers
Let ‘x’ be no. of break even units, which when sold will result in ‘zero’ net income. Then:
4.2x - 7560 = 0
4.2x = 7560
x = 7560/4.2
x = 1800 units
A
Contribution margin
$ 4.20
B
Sale price
$ 21.00
C=A/B
Contribution margin
20%
Let ‘x’ be total break even sales revenues where net income will be ‘zero’
20% of x - 7560 = 0
0.2x - 7560 = 0
0.2x = 7560
x = 7560/0.2
x = $ 37,800
A
Sale price
$ 21.00
B
variable expense
$ 16.80
C=A-B
Contribution margin
$ 4.20
D
Fixed expenses
$ 7,560.00
E=D/C
Break Even point in Unit Sale [Answer 1]
1800
A
Contribution margin
$ 4.20
B
Sale price
$ 21.00
C=A/B
Contriution margin
20%
E
Fixed expenses
$ 7,560.00
D=E/C
Break Even point in dollar sales
$ 37,800.00
4.2x - 7560 = 0
4.2x = 7560
x = 7560/4.2
x = 1800 units