Question

Menlo Company distributes a single product. The company's sales and expenses for last month follow: Per Unit $20 Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 3ee,eee 210,000 90, eee 75.628 $ 14.488 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 $31.200? 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 $59.000 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. Reg 1 Reg 2 Rey 3A Rey 3B Rey 4 Reg 5 What is the monthly break-even point in unit sales and in dollar sales? Break-even point in unit sales units Break-even point in dollar sales < Reet Req2 >

Answer 1

1.

Breakeven point in unit sales = Fixed cost/Contribution margin per unit = 75,600/6 = 12,600

Breakeven point in dollar sales = Fixed cost/Contribution margin ratio Contribution margin ratio = Contribution margin per unit/Selling price per unit = 6/20 = 30% = 75,600/30% = 252,000