Question

Mauro Products distributes a single product, a woven basket whose selling price is $15 per unit and whose variable expense is $13 per unit. The company’s monthly fixed expense is $4,600.

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.)

Answer 1

1.

Break-even point in units = Fixed expense / Contribution margin per unit

Break-even point in units = $4,600 / ($15-$13)

Break-even point in units = 2,300 Units

2.

Break-even point in Dollars = Break-even point in units * Selling price per unit

Break-even point in Dollars = 2,300*$15

Break-even point in Dollars = $34,500

3.

Break-even point in units = Fixed expense / Contribution margin per unit

Break-even point in units = ($4,600+$600) / ($15-$13)

Break-even point in units = 2,600 Units

Break-even point in Dollars = Break-even point in units * Selling price per unit

Break-even point in Dollars = 2,600*$15

Break-even point in Dollars = $39,000

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