# Maxson products distributes a single product, a woven basket whose

Chapter 3

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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.

2.     Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio.

3.     Compute for the company’s break-even point in unit sales using the formula method.

4.     Compute for the company’s break-even point in sales dollars using formula method and the CM ratio

3) Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning next month’s budget appear below:

Selling price   \$25 per unit

Variable expenses \$15  per unit

Fixed expenses \$8,500 per month

Unit sales 1,000  units per month

Required:

1) Compute the company’s margin of safety.

2) Compute the company’s margin of safety as a percentage of its sales.

4)Last month when Harrison Creations, Inc., sold 40,000 units, total sales were \$300,000, total variable expenses were \$240,000, and fixed expenses were \$45,000.

Required:

1)  What is the company’s contribution margin (CM) ratio?

2)  Estimate the change in the company’s net operating income if it were to increase its total sales by \$1,500.

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