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 $5,500.
|
| Required: |
| 1. |
Compute for the company’s break-even point in unit sales using the equation method.
|
| Break-even point in unit sales | 2,750  | baskets |
| 2. |
Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.Omit the "$" sign in your response.)
|
| CM ratio | .25 |
| Break-even point in dollar sales | $ 22,000 |
| 3. |
Compute for the company’s break-even point in unit sales using the formula method.
|
| Break-even point in unit sales | 2,750 | 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 |
| Break-even point in dollar sales | $ 22,000 |
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