Question

Mauro Products distributes a single product, a woven basket whose selling price is $27 per unit and whose variable expense is $21 per unit. The company’s monthly fixed expense is $12,000.

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.)

1.	Break-even point in unit sales		baskets
2.	Break-even point in dollar sales
3.	Break-even point in unit sales		baskets
	Break-even point in dollar sales

Answer 1

1. Contribution margin per unit = Selling price - Variable cost per unit = $27 - $21 = $6 per unit

Break-even point in unit sales = Fixed costs / Contribution margin per unit = $12,000 / $6 = 2,000 baskets

2. Break-even point in dollar sales = 2,000 baskets × $27 = $54,000

3. Break-even point in unit sales = New fixed costs / Contribution margin per unit = ($12,000 + $600) / $6 = 2,100 baskets

Break-even point in dollar sales = 2,100 baskets × $27 = $56,700