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Chapter 6 Question 4: Mauro Products distributes a single product, a woven basket whose selling price...

Chapter 6 Question 4:

Mauro Products distributes a single product, a woven basket whose selling price is $24 per unit and whose variable expense is $20 per unit. The company’s monthly fixed expense is $11,200.

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.)

Solutions

Expert Solution

Requirement 1

Breakeven point in units                       2,800

Requirement 2

Breakeven in sales dollars $ 67,200.00

Requirement 3

Breakeven point in units                       2,950
Breakeven in sales dollars $ 70,800.00

Working for requirement 1 and 2

A Sale Price per unit $                   24.00
B Variable Cost per Unit $                   20.00
C=A - B Unit Contribution $                     4.00
D Total Fixed cost $           11,200.00
E=D/C Breakeven point in units                       2,800
F= E x A Breakeven in sales dollars $ 67,200.00

Working for requirement 3

A Sale Price per unit $                   24.00
B Variable Cost per Unit $                   20.00
C=A - B Unit Contribution $                     4.00
D Total Fixed cost $           11,800.00
E=D/C Breakeven point in units                       2,950
F= E x A Breakeven in sales dollars $           70,800.00

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