Question

Mauro Products distributes a single product, a woven basket whose selling price is $17 per unit and whose variable expense is $14 per unit. The company’s monthly fixed expense is $8,400. 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?

Answer 1

Answer:

2800 units :  $47,600 : and 3000 units

Explanation:

By use of the contribution margin concept, the break-even point is the fixed cost/contribution margin per unit.

Contribution margin = selling price - variable cost

In this case:

Fixed costs: $8,400

selling price per unit $ 17

variable cost per unit $ 14

contribution margin

= $17 - $14

=$3

1. Break-even in units

=$ 8,400/$3

=2800 units

2. Break-even in dollars is break-even in units x sales price

= 2800 x $17

=$47,600

3. If fixed cost increases by $600

New fixed cost will be $600 +$8400= $9000

Break-even in units would be

= $9000/ $3

=3000 units