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 $23 and whose variable expense is $18.4 per unit. The company's monthly fixed expense is $6,900. 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 baske 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 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

Explanation / Answer

Answer:

1. Using the equation method, Find Break even point

Profit =(Sales- Variable expenses) + Fixed expenses

0=($23Q- $18.4Q )+ $6900

$4.6Q = $6900

Q = $6900 /$4.6

Q =1500 Units

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2.

Solve for the companies breakeven point in sales dollars using the equation method and the CM ratio.

CM ratio = Unit CM/ Unit selling price

CM Ratio =4.6 /23

Cm ratio =0.20

Profit =(CM ratio*sales) + Fixed expense

Profit =(0.2*X)- $6900

0=0.2x-6900

0.2x =6900

X = $6900 / 0.2

X = $34,500

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3.

Solve for the company’s breakeven point in unit sales using the formalla method

Unit sales to break even = Fixed cost / unit CM

Unit sales to break even =6900/23-18.4

=6900/4.6

= 1500 units.

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4.

Solve for the company’s breakeven point in sales dollars using the format method and the cm ration.

CM ratio = Unit CM/ Unit selling price

CM ratio = 23-18.4 /23

CM ratio = 4.6/23

CM ratio = 20%

Unit sales to break even = Fixed cost / unit CM ratio

Unit sales to break even =6900/20%

Unit sales to break even = Fixed cost / unit CM

Unit sales to break even =$34500

Profit =(Sales- Variable expenses) + Fixed expenses

0=($23Q- $18.4Q )+ $6900

$4.6Q = $6900

Q = $6900 /$4.6

Q =1500 Units

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