Question

Mauro Products distributes a single product, a woven basket whose selling price is $22 per unit and whose variable expense is $16 per unit. The company's monthly fixed expense is $14,400 

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
1	Break even point (units)	= Fixed cost / Contribution margin per unit
		= 14400 / (22-16)
		= 2400 Baskets
2	Break even sales in dollars	= Fixed cost / Contribution margin ratio
		= 14400 / (6/22)
		= $ 52800
3a.	Break even point (units)	= Fixed cost / Contribution margin per unit
		= 15000 / (22-16)
		= 2500 Baskets
3b.	Break even sales in dollars	= Fixed cost / Contribution margin ratio
		= 15000 / (6/22)
		= $ 55000