Question

Mauro Products distributes a single product, a woven basket whose selling price is $16 per unit and whose variable expense is $13 per unit. The company’s monthly fixed expense is $7,800.

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

Requirement 1:

Break-even point in units = Fixed cost ÷ (Selling price per unit - Variable cost per unit)

= $7,800 ÷ ($16 - $13)

= $7,800 ÷ $3

= 2,600 units

Requirement 2:

Break-even point in dollar sales = Break-even point in units x Selling price per unit

=2,600 units x $16

=$41,600

Requirement 3:

(i) New Break-even point in units = New Fixed cost ÷ (Selling price per unit - Variable cost per unit)

= ($7,800 + 600) ÷ ($16-$13)

= $8,400 ÷ $3

= 2,800 units

(ii) New Break-even point in dollar sales = New Break-even point in units x Selling price per unit

= 2,800 units x $16

= $44,800

answered by: anonymous