Question

Chp5 Saved Menlo Company distributes a single product. The company's sales and expenses for last month follow: points Total $ 306,000 214,200 Per Unit $20 14 $ 6 Sales Variable expenses Contribution margin Fixed expenses Net operating income 91,800 75,000 $ 16,800 eBook Print References Required: 1. What is the monthly break-even point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3.a. How many units would have to be sold each month to attain a target profit of $37,2007 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company's CM ratio? If sales increase by $92,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req ЗА Req 3B Req 4 What is the monthly break-even point in unit sales and in dollar sales? Break-even point in unit sales Break-even point in dollar sales < Req? Req2 >

Answer 1

30% Compute the CM ratio Selling Price Per unit Varaibel Expense Per unit Contribution Margin per unit (Selling Price - Varible Cost) CM Ratio =(CM/Selling Price) 1. Compute the Break Even pont 1 Break Even in Unit Sales =( Fixed Cost / CM Per unit) 2.Brake Even in Dollar sales =( Fixed Cost/ CM ratio) 2. Determine the Contribution Margin at the Break even point Contribution Margin at the Break even point = Fixed Cost 3. a) Units to get the target profit of $37200 (Fixed cost + target profit)/ CM per unit 3.B) Verify the answer with Contribution margin Income Statement Contribution Margin Statement 12500 Units 250000 Dollars 75000 18700 Total Per unit 374000 2618001 112200 750001 37200 sale Varaible Expenses Contibution margin Fixed Expenses Net Operating Income 4. Compute the Margin of Safety Margin of Safety in dollars =(units selling price -BEP Dollars) Margin of Safety in Percentage =(Margin of safety Dollars/ Actual sales) 5 CM Ratio =( CM/Selling Price) Net Operating Income Increased by (0.30*92000) 56000 Dollars 18.30% Percent 30% 27000