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Tuesday, 31 July 2012

Maxson Products distributes a single product, a woven basket whose selling price is $8 and

Exercise 5-7 Compute the Break-Even Point [LO6]
Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.

Required:
1.
Compute for the company’s break-even point in unit sales using the equation method.

  Break-even point in unit sales 2,750 correct  baskets

2.
Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.Omit the "$" sign in your response.)

  CM ratio .25 correct    
  Break-even point in dollar sales $ 22,000 correct    

3.
Compute for the company’s break-even point in unit sales using the formula method.

  Break-even point in unit sales 2,750 correct  baskets

4.
Compute for the company’s break-even point in sales dollars using formula method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places. Omit the "$" sign in your response.)

  CM ratio .25 correct    
  Break-even point in dollar sales $ 22,000 correct