# Question & Answer: Mauro Products distributes a single product, a woven basket whose selling price is \$28 and whose variable expen…..

Mauro Products distributes a single product, a woven basket whose selling price is \$28 and whose variable expense is \$23.24 per unit. The company’s monthly fixed expense is \$10,472.

a. Solve for the company’s break-even point in unit sales using the equation method.

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b. Solve for the company’s break-even point in dollar sales using the equation method and the CM ratio.

c. Solve for the company’s break-even point in unit sales using the formula method.

d. Solve for the company’s break-even point in dollar sales using the formula method and the CM ratio.

Selling Price = \$28
Variable Expense per unit = \$23.24
Fixed Expenses = \$10,472

Let x be the breakeven number of units sold

Under equation method:

Sales = Variable Expense + Fixed Expense
\$28*x = \$23.24*x + \$10,472
\$4.76*x = \$10,472
x = 2,200

So, Breakeven point in unit sales is 2,200 units

Selling Price = \$28
Variable Expense per unit = \$23.24
Fixed Expenses = \$10,472

CM Ratio = (Selling Price – Variable Expense per unit) / Selling Price
CM Ratio = (\$28.00 – \$23.24) / \$28.00
CM Ratio = 0.17

Let \$x be the breakeven point in dollar sales

Sales = Variable Expense + Fixed Expense
Sales – Variable Expense = Fixed Expense
Contribution Margin = Fixed Expenses
\$x*0.17 = \$10,472
\$x = \$61,600

So, Breakeven point in dollar sales is \$61,600

Selling Price = \$28
Variable Expense per unit = \$23.24
Fixed Expenses = \$10,472

Breakeven point in unit sales = Fixed Expenses / (Selling Price – Variable Cost per unit)
Breakeven point in unit sales = \$10,472 / (\$28.00 – \$23.24)
Breakeven point in unit sales = 2,200

Under Formula Method:

Selling Price = \$28
Variable Expense per unit = \$23.24
Fixed Expenses = \$10,472

CM Ratio = (Selling Price – Variable Expense per unit) / Selling Price
CM Ratio = (\$28.00 – \$23.24) / \$28.00
CM Ratio = 0.17

Breakeven Point in dollar sales = Fixed Expenses / CM Ratio
Breakeven Point in dollar sales = \$10,472 / 0.17
Breakeven Point in dollar sales = \$61,600