Question

Mauro Products distributes a single product, a woven basket whose selling price is $15 per unit and whose variable expense is $12 per unit. The company’s monthly fixed expense is $4,200. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. 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

1. The company’s break-even point in unit sales is 1,400 units

2. The company’s break-even point in dollar sales is $21,000

3. If the company's fixed expenses increase by $600, the new break-even point in unit sales is 1,600 units and $24,000 in dollar sales.

Step-by-step explanation:

1. The company’s break-even is when total revenues = total cost

⇔ Sales = Fixed cost + variable cost

⇔ Selling price per unit * number of units = Fixed cost + variable expense per unit * number of units

⇔$15 * number of units = $4,200 + $12 * number of units

⇒ Number of units = $4,200/ ($15 - $12) = 1,400

2. Calculate the company’s break-even point in dollar sales.

= Selling price per unit * number of units

= $15 *1400 = $21,000

3. If the company's fixed expenses increase by $600, then we have:

$15 * number of units = ($4,200 +600) + $12 * number of units

⇒ number of units = 4,800/(15-12) = 1,600

Sales = $15 * 1,600 = $24,000

Answer 2

• 1. Calculate the company’s break-even point in unit sales.

It's necessary to sale 1.400 units.

• 2. Calculate the company’s break-even point in dollar sales.

It's necessary to sale an amount of $ 21.000 .

• 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales?

It's necessary to sale 1.400 units and in dollar sales the break even point it's $ 24.000 .

Step-by-step explanation:

The first break even point indicates the next:

Woven Basket

Quantity 1.400

TOTAL Income Statement Unit

$ 21.000 Total Net Sales $ 15

-$ 16.800 Variable Cost -$ 12

$ 4.200 Contributing Margin $ 3

-$ 4.200 Anual Fixed Costs

When the Fixed costs changes it's necessary to find a new break even point:

TOTAL Income Statement Unit

$ 24.000 Total Net Sales $ 15

-$ 19.200 Variable Cost -$ 12

$ 4.800 Contributing Margin $ 3

-$ 4.800 Anual Fixed Costs