Question

Mauro Products distributes a single product, a woven basket whose selling price is $20 per unit and whose variable expense is $17 per unit. The company’s monthly fixed expense is $8,100. Required: If the company's fixed expenses increase by $600, what would become the new break-even point in dollar sales?

Answer 1

the new break-even point in dollar sales is $29,000.

Step-by-step explanation:

Break even point is the level of activity where a firm makes neither a profit nor a loss.

Break even point (dollar sales) = Fixed Cost ÷ Contribution Margin Ratio

Where, Contribution Margin Ratio = Contribution ÷ Sales

= ($20 - $17) ÷ $20

= 0.30

New Break even point (dollar sales) = ($8,100 + $600) ÷ 0.30

= $29,000