Question

Mauro Products distributes a single product, a woven basket whose selling price is $14 per unit and whose variable expense is $12 per unit. The company’s monthly fixed expense is $4,200. 1. Calculate the company’s break-even point in unit sales. . Calculate the company’s break-even point in dollar sales. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?

Answer 1

	CALCULATION OF CONTRIBUTION MARGIN
	PARTICULARS	AMOUNT
	Sales	$                           14
	Less: Variable Cost	$                           12
	Contribution Margin	$                             2
	Fixed expenses	$                     4,200
	Contribution margin = Sales - Variable Costing / Sales
	Contribution margin = $ 2 / $ 14 =	0.1429
	Contribution margin %=	14.29%
	CALCULATION OF THE BREAK EVEN POINT IN UNITS
	Break Even point =      Fixed Cost / Contribution Margin Per Unit
	Break Even point =
	Fixed Cost =	$                     4,200
	Divide By	"/" By
	Contribution Margin Per Unit =	$                             2
	Break Even point =	2100	Units
	Answer = Break even point in units =	2100	Units
	CALCULATION OF THE BREAK EVEN POINT IN DOLLARS
	Break Even point =      Fixed Cost / Contribution Margin Ratio
	Break Even point =
	Fixed Cost =	$                     4,200
	Divide By	"/" By
	Contribution Margin Ratio =	0.1429
	Break Even point in Dollars =	$                   29,400
	Answer = BEP in Dollars =	$                   29,400
	CALCULATION OF THE BREAK EVEN POINT IN UNITS WHEN FIXED COST INCREASE BY $ 600
	Break Even point =      Fixed Cost / Contribution Margin Per Unit
	Break Even point =
	Fixed Cost =	$                     4,800
	Divide By	"/" By
	Contribution Margin Per Unit =	$                             2
	Break Even point =	2400	Units
	Answer = Break even point in units =	2400	Units
	CALCULATION OF THE BREAK EVEN POINT IN DOLLARS WHEN FIXED COST INCREASE BY $ 600
	Break Even point =      Fixed Cost / Contribution Margin Ratio
	Break Even point =
	Fixed Cost =	$                     4,800
	Divide By	"/" By
	Contribution Margin Ratio =	0.1429
	Break Even point in Dollars =	$                   33,600
	Answer = BEP in Dollars =	$                   33,600