In: Accounting
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.
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