Question

Maxson Products distributes a single product, a woven basket whose selling price is $19 and whose variable cost is $15.96 per unit. The company’s monthly fixed expense is $9,120.

6.

value:
12.50 points

Required information

Exercise 3-7 Part 1 and 2

Required:
1.	Compute for the company’s break-even point in unit sales using the equation method.

      
  

2.	Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.)

     

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Hint #1

Check my work

7.

value:
12.50 points

Required information

Exercise 3-7 Part 3 and 4

3.	Compute for the company’s break-even point in unit sales using the formula method.

      
  

4.	Compute for the company’s break-even point in sales dollars using formula method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.)

     

Answer 1

1.Break even point in equation method

Sales = Variable cost + Fixed cost + profit

Since profit is 0 at break even point

x be the break even sales(units)

Sales = Variable cost + Fixed cost

$19 *x = $15.96*x + $9,120

x =$9,120/3.04

= 3000 units

2. Break even point in sales($)= 3000 units* $19 = $57000

CM RATIO = $3.04/$19 *100

= 0.16

3.Break even point = Fixed costs/contribution per unit

= $9120/$3.04

= 3000 units

4.  Break even point in sales($)= 3000 units* $19 = $57000

CM RATIO = $3.04/$19 *100

= 0.16