Mauro Products sells a woven basket for $26 per unit. Its variable expense is $23 per unit and the company’s monthly fixed expense is $6,000.

Required:
Calculate the company’s break-even point in unit sales.
Calculate the company’s break-even point in dollar sales.
Note: Do not round intermediate calculations.

If the company's 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.

To solve this, we will use basic Cost-Volume-Profit (CVP) analysis. Here's a step-by-step breakdown of each part of the question:

### 1. **Break-even point in unit sales:**

The formula for break-even point in units is:

\[
\text{Break-even point (units)} = \frac{\text{Fixed expenses}}{\text{Contribution margin per unit}}
\]

Where:
- **Fixed expenses** = $6,000
- **Selling price per unit** = $26
- **Variable expense per unit** = $23
- **Contribution margin per unit** = Selling price per unit - Variable expense per unit

\[
\text{Contribution margin per unit} = 26 - 23 = 3
\]

Now, calculate the break-even point in units:

\[
\text{Break-even point (units)} = \frac{6,000}{3} = 2,000 \text{ units}
\]

### 2. **Break-even point in dollar sales:**

The formula for break-even point in dollars is:

\[
\text{Break-even point (dollars)} = \text{Break-even point (units)} \times \text{Selling price per unit}
\]

We already calculated the break-even point in units as 2,000 units, so:

\[
\text{Break-even point (dollars)} = 2,000 \times 26 = 52,000 \text{ dollars}
\]

### 3. **New break-even point in unit sales if fixed expenses increase by $600:**

If the fixed expenses increase by $600, the new fixed expenses become:

\[
\text{New fixed expenses} = 6,000 + 600 = 6,600
\]

The new break-even point in units is:

\[
\text{Break-even point (units)} = \frac{6,600}{3} = 2,200 \text{ units}
\]

### 4. **New break-even point in dollar sales if fixed expenses increase by $600:**

The new break-even point in dollars is:

\[
\text{Break-even point (dollars)} = 2,200 \times 26 = 57,200 \text{ dollars}
\]

### Summary of Answers:
1. Break-even point in unit sales: **2,000 units**
2. Break-even point in dollar sales: **$52,000**
3. New break-even point in unit sales (with $600 increase in fixed expenses): **2,200 units**
4. New break-even point in dollar sales (with $600 increase in fixed expenses): **$57,200**

---

Would you like further details on any of the calculations or concepts?

### 5 Related Questions:
1. What is the contribution margin ratio, and how is it used?
2. How would a change in variable costs affect the break-even point?
3. What happens to the break-even point if the selling price increases?
4. How can a company lower its break-even point?
5. How does operating leverage relate to fixed and variable costs?

### Tip:
Lowering fixed costs or increasing the contribution margin per unit (by either raising prices or reducing variable costs) are two ways to lower the break-even point and improve profitability.

Mauro Products sells a woven basket for $26 per unit. Its variable expense is $23 per unit and the company’s monthly fixed expense is $6,000.

Required:
Calculate the company’s break-even point in unit sales.
Calculate the company’s break-even point in dollar sales.
If the company's 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.

Learn how to calculate the break-even point for Mauro Products using CVP analysis. This includes determining the break-even point in unit sales and dollar sales, and analyzing the effect of a $600 increase in fixed expenses. Key concepts include contribution margin and break-even formulas.

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