Question

Help Save & Exit Check my Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company's fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year points Required: 1. What are the variable expenses per unit? 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 $60,000 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 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 $60,000? eBook Print References Variable expense per unit 2. 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 < Prev 9 of 12 Next >

Answer 1

	Selling price	40
	CM ratio	30%
	Contribution margin	12	(40*30%)
1.	Variable expense per unit	28	(40*70%)
2.	Breakeven in units	Fixed cost/contribution per unit
		180,000/12
		15,000
	Breakeven point dollar sales	Fixed cost/CM ratio
		180,000/30%
	Breakeven point dollar sales	$600,000
3.	Units needed to attain target profit	(Fixed cost+Target profit)/Contribution per unit
		(180,000+60,000)/12
	Units needed to attain target profit	20,000
	Dollar sales needed to attain to target profit	(Fixed cost+Target profit)/CM ratio
		(180,000+60,000)/30%
	Dollar sales needed to attain to target profit	$800,000
4.	Selling price	$40
	New variable cost	$24
	Contribution per unit	$16
	Contribution margin	40%
	New breakeven point in unit sales	180,000/16
	New breakeven point in unit sales	11,250
	New breakeven in dollar sales	180,000/40%
	New breakeven in dollar sales	$450,000
	Dollar sales needed to attain target profit	(60,000+180,000)/40%
	Dollar sales needed to attain target profit	$600,000

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