Question

Mauro Products distributes a single product, a woven basket whose selling price is $15 per unit and whose variable expense is $12 per unit. The company’s monthly fixed expense is $4,200. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?

1	break even point in unit sales		baskets
2	break even point in dollar sales
3	break even point in unit sales		baskets
4	break even point dollar sale

Answer 1

Answer 1.

Selling Price per unit = $15
Variable Cost per unit = $12
Fixed Expense = $4,200

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $15 - $12
Contribution Margin per unit = $3

Breakeven Point in unit sales = Fixed Expense / Contribution Margin per unit
Breakeven Point in unit sales = $4,200 / $3
Breakeven Point in unit sales = 1,400

Answer 2.

Breakeven Point in dollar sales = Breakeven Point in unit sales * Selling Price per unit
Breakeven Point in dollar sales = 1,400 * $15
Breakeven Point in dollar sales = $21,000

Answer 3.

Fixed Expense = $4,200 + $600
Fixed Expense = $4,800

Breakeven Point in unit sales = Fixed Expense / Contribution Margin per unit
Breakeven Point in unit sales = $4,800 / $3
Breakeven Point in unit sales = 1,600

Answer 4.

Breakeven Point in dollar sales = Breakeven Point in unit sales * Selling Price per unit
Breakeven Point in dollar sales = 1,600 * $15
Breakeven Point in dollar sales = $24,000