Question

Lindon Company is the exclusive distributor for an automotive product that sells for $40.00 per unit and has a CM ratio of 30%. The company's fixed expenses are $246,000 per year. The company plans to sell 23,700 units this year. Required: 1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.) 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $126,000 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.00 per unit. What is the company's new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $126,000? 1. Variable expense per unit Break-even point in units Break-even point in dollar sales Unit sales needed to attain target profit Dollar sales needed to attain target profit New break-even point in unit sales New break-even point in dollar sales Dollar sales needed to attain target profit

Answer 1

First part of above Question- Please see below step by step . Each answer derived with formula and number ( majority number already there in Question ,+ I highlighted formula where ever it is use   

Lindon Company
Selling Price ( $/unit		40
CM Ratio( Contribution Margin)		30%
Fixed Expenses ($)		2,46,000
Selling Unit		23,700
Variable Cost/ Unit		Sales price - Contribution
Contribution / Unit
CM Ratio (a)		30%
Selling Price ( $/unit(b)		40
Contribution( per unit(a*b)		12
Variable Cost/ Unit		Sales price - Contribution
		40-12
Variable Cost/ Unit ($/unit		28
Break even Points in Unit & Dollar Sales
Break even Points in Unit
Contribution		Sales Unit - Variable cost / unit
		40-28
Contribution$/ unit		12
Fixed cost		2,46,000
Break even Points in Unit		Fixed cost/Contribution per unit
		246000/12
Break even Points in Unit		20,500
Break even Points in Dollar
CM Ratio		30%
Fixed Cost		2,46,000
Break even Points in Dollar		246000/30%
Break even Points in Dollar ($)		8,20,000
Break even Points in Unit & Dollar Sales Target profit ( $126000)
Break even Points in Unit
Contribution		Sales Unit - Variable cost / unit
		40-28
Contribution$/ unit		12
Fixed cost		2,46,000
Target Profit		1,26,000
Break even Points in Unit		Fixed cost+Target Profit /Contribution per unit
		('246000+126000)/12
Break even Points in Unit		31,000
Break even Points in Dollar
CM Ratio		30%
Fixed Cost		2,46,000
Target Profit		1,26,000
Break even Points in Dollar		(246000+126000)/30%
Break even Points in Dollar ($)		12,40,000
Variable cost reduced by $4/ Unit
Revised variable cost per Unit
Variable Cost/ Unit ($/unit		28
Less Reduction		4
New variable cost ($/unit)		24
Break even Points in Unit & Dollar Sales
Break even Points in Unit
Contribution		Sales Unit - Variable cost / unit
		40-24
Contribution$/ unit		16
Fixed cost		2,46,000
Break even Points in Unit		Fixed cost/Contribution per unit
		246000/16
Break even Points in Unit		15,375
Break even Points in Dollar
CM Ratio ( changed)		40%
Sales ( Unit)		40
New Variable Cost( unit)		24
Contribution($/ unit		16
Contribution Margin		40%
Fixed Cost		2,46,000
Break even Points in Dollar		246000/40%
Break even Points in Dollar ($)		6,15,000
Break even Points in Unit & Dollar Sales Target profit ( $126000)
Break even Points in Unit
Contribution		Sales Unit - Variable cost / unit
		40-24
Contribution$/ unit		16
Fixed cost		2,46,000
Target Profit		1,26,000
Break even Points in Unit		Fixed cost+Target Profit /Contribution per unit
		('246000+126000)/16
Break even Points in Unit		23,250
Break even Points in Dollar
CM Ratio ( changed)		40%
Fixed Cost		2,46,000
Target Profit		1,26,000
Break even Points in Dollar		(246000+126000)/40%
Break even Points in Dollar ($)		9,30,000

Answer 1	Outbrack Outfitters- Stove
	Selling Price ( $/unit(a)		110
	Variable Cost ( $/ unit)(b)		77
	Fixed Expenses ($)		1,58,400
	Contribution Margin( $/ Unit)(a-b)		33
	Contribution Margin Ratio		Contribution/ Sales)
	Contribution Margin Ratio		30%
	Breakeven Points in Unit & Dollar Sales
	Breakeven Points in Unit
	Contribution ($/Unit		33
	Fixed cost		1,58,400
	Breakeven Points in Unit		Fixed cost/Contribution per unit
			158400/33
	Breakeven Points in Unit		4,800
	Breakeven Points in Dollar
	Contribution Margin Ratio		30%
	Fixed Cost		1,58,400
	Breakeven Points in Dollar		158400/30%
	Breakeven Points in Dollar ($)		5,28,000
Answer 2	If variable Expenses increased in line with percenage of Selling price
	Then contribution per unit will decrease and Break even Point will increase
Answer 3	Present Income Statement		Unit (c)	Rate ($/unit)(d)	Value ( $)(c*d)
	Sales ( unit as per Question)		17,000	110	18,70,000
	Variable Cost		17,000	77	13,09,000
	Contribution ( Sales - variable CosT)				5,61,000
	Fixed cost( as per Question)				1,58,400
	Net Margin				4,02,600
	Revised Income Statement		Unit (c)	Rate ($/unit)(d)	Value ( $)(c*d)
	Sales ( unit as per Question)
	17000 Unit		21,250	99	21,03,750
	25% increase in Selling Unit
	17000*1.25
	Selling Price ( 10% reduction)
	Selling price ( $/Unit )-110
	90% of $110 / unit =$99/Unit
	Variable Cost		21,250	77	16,36,250
	Contribution ( Sales - variable CosT)				4,67,500
	Fixed cost( as per Question)				1,58,400
	Net Margin				3,09,100
Answer 4	Revised Contribution Margin
	Selling price ( $/ Unit ) ( as above)				99
	Variable Cost ( Unit)				77
	Contribution Unit ($/Unit)				22
	Fixed cost ($)				1,58,400
	Target profit ( as per Question)$				78,000
	Contribution Unit ($/Unit)				22
	Numbe of Stove				('Fixec Cost+ Traget Profit )/Contribution per unit
	Numbe of Stove ( Unit)				10,745