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Mauro Products distributes a single product, a woven basket whose selling price is $21 per unit and whose variable expense is $18 per unit. The company’s monthly fixed expense is $8,100. 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

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Answer:

1. Break even points in units will be =  2,700 units

2. Break-even point in dollar sales = $56,700

3. In case fixed expense increase by $600 then Break even point in unit sales = 2,900 units

Explanation:

Break even point = [tex]\frac{Fixed Cost}{Contribution per unit}[/tex]

Fixed Cost = $8,100

Contribution per unit = Sale Price - Variable Cost = $21 - $18 = $3

1. Break even points in units will be

= [tex]\frac{8,100}{3} = 2,700 units.[/tex]

2. Break-even point in dollar sales

= Break even point in units X Sale price per unit

= 2,700 units X $21 = $56,700

3. In case fixed expense increase by $600 then Break even point in unit sales

= [tex]\frac{8,100 + 600}{3}[/tex] = 2,900 units

Final Answer

1. Break even points in units will be =  2,700 units

2. Break-even point in dollar sales = $56,700

3. In case fixed expense increase by $600 then Break even point in unit sales = 2,900 units

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