Question

Mauro Products distributes a single product, a woven basket whose selling price is $27 and whose variable expense is $19.17 per unit. The company’s monthly fixed expense is $10,962.

Required:

1. Solve for the company’s break-even point in unit sales using the equation method. (Do not round your intermediate calculations.)

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.)

    

3. Solve for the company’s break-even point in unit sales using the formula method. (Do not round your intermediate calculations.)

4. Solve for the company’s break-even point in dollar sales using formula method and the CM ratio. (Do not round intermediate calculations. Round "CM ratio percent" to nearest whole percent.)

Answer 1

Given info:

Selling price: $ 27

Veriable exp: $19.17 per unit

Fixed Expenses: $10,962

1) Break-even point in unit sales using equation method:

• Contribution margin=Selling price−Variable expenses
• Profit= P
• Contribution Margin= CM
• Quantity= Q
• Fixed Expenses = F
• Variable Expenses = V

Equation: $0=Unit CM×Q−F

$0=(27-19.17) x Q - $10962

$10,962 = 7.83 x Q

= Q

1400 = Q

2) Break-even Sales Dollars = Fixed Costs ÷ Contribution Margin ratio

Contribution margin raio= $ 7.83 x100/27 = 29

Break-even Sales Dollars = Fixed Costs ÷ Contribution Margin ratio

= = 37800

3) break-even point in unit sales using the formula method:

Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)

= = = 1400 units

4) break-even point in dollors using the formula method:

Break-Even point= Sales price per unit x number of break even units

= $27 x 1400 = $37,800