Question

Mauro Products distributes a single product, a woven basket whose selling price is $26 per unit and whose variable expense is $21 per unit. The company’s monthly fixed expense is $5,500. 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.) Garrison 16e Rechecks 2017-09-08, 2017-09-19

Answer 1

Answer 1.

Selling Price per unit = $26
Variable Expense per unit = $21
Fixed Expenses = $5,500

Contribution Margin per unit = Selling Price per unit - Variable Expense per unit
Contribution Margin per unit = $26 - $21
Contribution Margin per unit = $5

Breakeven Point in unit sales = Fixed Expenses / Contribution Margin per unit
Breakeven Point in unit sales = $5,500 / $5
Breakeven Point in unit sales = 1,100

Answer 2.

Breakeven Point in dollar sales = Breakeven Point in unit sales * Selling Price per unit
Breakeven Point in dollar sales = 1,100 * $26
Breakeven Point in dollar sales = $28,600

Answer 3.

Selling Price per unit = $26
Variable Expense per unit = $21
Fixed Expenses = $6,100

Contribution Margin per unit = Selling Price per unit - Variable Expense per unit
Contribution Margin per unit = $26 - $21
Contribution Margin per unit = $5

Breakeven Point in unit sales = Fixed Expenses / Contribution Margin per unit
Breakeven Point in unit sales = $6,100 / $5
Breakeven Point in unit sales = 1,220