## 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 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