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 $18 and whose variable expense is $15.48 per unit. The company's monthly fixed expense is $2,772. Required: 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 sales 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 Break-even point in dollar sales 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 baskets

Explanation / Answer

Under Equation method: -

Profit = (Unit CM * Q) - Fixed Expenses, At breakeven profit will be “ZERO”

0= ((18.00-15.48)*Q)-2772

2772=2.52Q

Q is = 2772/2.52

Q is 1,100 Units

Breakeven units is 1,100

Under Equation method & CM Ratio: -

CM ratio = Unit CM ÷ Unit Selling Price

CM ratio = (2.52/18)*100

CM ratio = 14%

Profit = (CM Ratio* Sales) - Fixed Expenses

0=(0.14*Sales)-2772

Sales = 2772/0.14

Sales is $ 19,800 /-

Formula method:-

Breakeven units is = Fixed cost/Contribution per unit

Breakeven units is =2772/(18-15.48)

Breakeven units is = 1,100 Units

Formula method & CM Ratio:-

Dollars to break even = Fixed Expenses ÷ CM ratio

Dollars to break even = 2772/(14%)

Dollars to break even = $ 19,800 /-

Breakeven units = Breakeven sales/Selling price per unit

Breakeven units =19800/18

Breakeven units = 1,100 Units

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