Mauro Products distributes a single product, a woven basket whose selling price
ID: 2540395 • Letter: M
Question
Mauro Products distributes a single product, a woven basket whose selling price is $18 per unit and whose variable expense is $14 per unit. The company’s monthly fixed expense is $8,400.
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.)
Explanation / Answer
1.Contribution margin=Sales-VC
=(18-14)=$4 per unit
Hence breakeven=Fixed cost/Contribution margin
=(8400/4)=2100 units
2.Breakeven value=(2100*18)=$37800
3.New breakeven=(8400+600)/4=2250 units
=(2250*18)=$40500