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chapter 5 homework
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mauro products sells a woven basket for $26 per unit. its variable expense is $19 per unit and the companys monthly fixed expense is $16,800.
required:

1. calculate the companys break-even point in unit sales.
2. calculate the companys break-even point in dollar sales.

note: do not round intermediate calculations.

1. if the companys fixed expenses increase by $600, what would become the new break-even point in unit sales? in dollar sales?

note: do not round intermediate calculations.

1. break-even point in unit sales baskets
2. break-even point in dollar sales
3. break-even point in unit sales baskets
4. break-even point in dollar sales

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Explanation:

Step1: Calculate unit contribution margin

$\text{Unit Contribution Margin} = \text{Selling Price per Unit} - \text{Variable Expense per Unit} = 26 - 19 = \$7$

Step2: Find break-even unit sales

$\text{Break-even Unit Sales} = \frac{\text{Fixed Expenses}}{\text{Unit Contribution Margin}} = \frac{16800}{7} = 2400$

Step3: Calculate break-even dollar sales

$\text{Break-even Dollar Sales} = \text{Break-even Unit Sales} \times \text{Selling Price per Unit} = 2400 \times 26 = \$62400$

Step4: Compute new fixed expenses

$\text{New Fixed Expenses} = 16800 + 600 = \$17400$

Step5: Find new break-even unit sales

$\text{New Break-even Unit Sales} = \frac{\text{New Fixed Expenses}}{\text{Unit Contribution Margin}} = \frac{17400}{7} \approx 2485.71$

Step6: Calculate new break-even dollar sales

$\text{New Break-even Dollar Sales} = \text{New Break-even Unit Sales} \times \text{Selling Price per Unit} = \frac{17400}{7} \times 26 = \$64628.57$

Answer:

1. Break-even point in unit sales: 2400 baskets
2. Break-even point in dollar sales: $\$62400$
3. Break-even point in unit sales: 2485.71 baskets
4. Break-even point in dollar sales: $\$64628.57$