Exercise 5-6
Profit = (Unit CM * Q) - Fixed Expenses
$0 = (($26-$19.24) * Q) - $18,252
÷
$0 = ($6.76Q) - $18,252
$6.76Q = $18,252
Q = $18,252 ÷ $6.76
Q = 2,700 baskets
CM ratio = Unit CM ÷ Unit Selling Price
CM ratio = $6.76 ÷ $26
CM ratio = 0.26
Profit = (CM ratio * Sales) - Fixed Expenses
$0 = (0.26 * Sales) - $18,252
0.26 * Sales = $18,252
Sales = $18,252 ÷ 0.26
Sales = $70,200
Unit sales to break even = Fixed Expenses ÷ Unit CM
Unit sales to break even = $18,252 ÷ $6.76
Unit sales to break even = 2,700 baskets
Dollars to break even = Fixed Expenses ÷ CM ratio
Dollars to break even = $18,252 ÷ 0.26
Dollars to break even = $70,200
Mauro Products distributes a single product, a woven basket whose selling price is $26 and whose variable expense is $19.24 per unit. The company’s mo
fixed expense is $18,252.
1.
Required:
Solve for the company’s break-even point in unit sales using the equation method. (Do not round your intermediate calculations.) -
Refer to Slid
formula.
2.
Required:
Solve for the company’s break-even point in dollar sales using the equation method and the CM ratio. (Do not round intermediate calculations.
"CM ratio percent" to nearest whole percent.)ration percent to the nearest whole percent.) -
Refer to Slide 51 for formula.
3.
Required:
Solve for the company’s break-even point in unit sales using the formula method. (Do not round your intermediate calculations.) -
Refer to Slide
formula.
4.
Required:
Solve for the company’s break-even point in dollar sales using the formula method and the CM ratio. (Do not round intermediate calculations. R
"CM ratio percent" to nearest whole percent.) -
Refere to Slide 53 for formula.

onthly
de 48 for
Round
e 50 for
Round

Exercise 5-7
Lin Corporation has a single product whose selling price is $120 and whose variable expense is $80 per unit. The company’s monthly fixed expense is $50,000
Profit = (Unit CM * Q) - Fixed Expenses
$10,000 = (($120-$80) * Q) - $50,000
$10,000 = ($40 * Q) - $50,000
$40Q = $10,000 + $50,000
Q = 1,500 units
Units sold to attain target profit = 1,625 units
Part 1 - Required:
Using the equation method, determine for the unit sales that are required to earn a target profit of $10,000. -
Refer to slide 60 for formula.

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- Fall '08
- CORACI
- Accounting, Marketing, Contribution Margin, Sales, Net Income