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Mauro Products distributes a single product, a woven basket whose selling price is $20 per unit and whose variable expense is $17 per unit. The company’s monthly fixed expense is $8,100. Required: If the company's fixed expenses increase by $600, what would become the new break-even point in dollar sales?

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Answer:

the new break-even point in dollar sales is  $29,000.

Explanation:

Break even point is the level of activity where a firm makes neither a profit nor a loss.

Break even point (dollar sales) = Fixed Cost ÷ Contribution Margin Ratio

Where, Contribution Margin Ratio = Contribution ÷ Sales

                                                        = ($20 - $17) ÷ $20

                                                        = 0.30

New Break even point (dollar sales) = ($8,100 + $600) ÷ 0.30

                                                            = $29,000

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