Question

Mauro Products distributes a single product, a woven basket whose selling price is $19 per unit and whose variable expense is $15 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.)

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Selling price= $19

Unitary variable cost= $15

Fixed costs= $12,000

To calculate the break-even point in units and dollars, we need to use the following formulas:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 12,000 / 4

Break-even point in units= 3,000

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 12,000 / (4/19)

Break-even point (dollars)= $57,000

Now, the fixed costs are $12,600:

Break-even point in units= 12,600 / 4

Break-even point in units= 3,150

Break-even point (dollars)= 12,600 / (4/19)

Break-even point (dollars)= $59,850