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 $17 and whose variable expense is $14.79 per unit. The company's monthly fixed expense is $2,873. 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 ratico. (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

Mauro Products distributes a single product, a woven basket whose selling price is $17 and whose variable expense is $14.79 per unit. The company’s monthly fixed expense is $2,873

1) company’s break even point in unit sales using equation method

Answer :    Profit =unit CM *Q-fixed expenses

                         0 = (17-14.79)*Q-2,873

                        0 = 2.21*Q-2,873

                        2.21Q =2,873

                    Q =2,873/2.21=1300

            Q = 1300

        Break even point in unit sales =1300 baskets

2) company’s break even point in dollar sales using the equation method and CM ratio

Answer :       CM ratio =1300 baskets*17(selling price) =22,100

                                   2873/22,100=13%

                            CM ratio =13%

                  Profit =sales * CM ratio –fixed expenses

                       0 = sales * 13%-2873

                     Sales =2873/13% =22,100

                 CM ratio =13%

             Break even point in dollar sales =22,100

3) company’s break even point in unit sales using the formula method

Answer :   unit sales to break even =fixed expenses/unit CM

                  Unit sales to break even = 2,873/(17-14.79)

                                                          = 2,873/2.21 =1300

         Break even point in unit sales =1300 baskets

4) company’s break even point in dollar sales using the formula method and CM ratio

Answer :      Dollar sales to break even = fixed expenses / CM ratio

                    Dollar sales to break even =2873/13% =22,100

                 CM ratio =13%

              Break even point in dollar sales = 22,100

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