Question

Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit $ 612,000 Sales Variable expenses $ 40 428,400 28 Contribution margin $ 12 183,600 Fixed expenses 151,200 Net operating income 32,400 Required: 1. 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 sales dollars 2. Without resorting to computations, what is the total contribution margin at the break-even point? Total contribution margin 3-a. How many units would have to be sold each month to earn a target profit of $58,800? Use the formula method. Units sold

Answer 1

- A Per Unit 40 3 Sales 4 Variable expenses 5 Contribution 6 Fixed expenses 7 Net Operating income В Contribution Total 612,000 $ 428,400 $ 183,600 $ 151,200 32,400 28 12 Contribution margin ratio =Contribution/Sales =$183,600 / $612,000 30% Question - 1 =Fixed Expenses / Contribution per unit Break-even point in unit sales =$151,200 / $12 12,600 units =Fixed Expenses / Contribution margin ratio Break-even point in sales dollars =$151,200 / 30% 504,000 Question - 2 =Break even point in units * Contribution per unit =12,600 units * $12 151.200 Total Contribution margin

в с D E 26 27 Question - 3a 28 sales to earn a target profit of $58,800 =(Fixed Expenses + target profit) / Contribution per unit 30 Sales to earn a target profit =($151,200 + $58,800 / $12 17,500 units 29 32 35 36 Question - 3b 34 Menlo Company Contribution Income Statement Total Per Unit 37 Sales $ 700,000 $ 38 Variable expenses 490,000 $ 39 Contribution 210,000 $ 40 Fixed expenses 151,200 41 Net Operating income 58,800 40 28 12 42 43 44 sales 45 Question - 4 sales to earn a target profit after tax of $58,800 =(Fixed Expenses + target profit) / Contribution per unit Sales to earn a target profit |=($151,200 + ($58,800*(100/60))) / $12 20,766.67 units 46 47 19

Α в с Question - 5 =Current Sales level - breakeven point =$612,000 - $504,000 $ 108,000 Margin of Safety in dollars Margin of Safety in dollars =(Current Sales level - breakeven point) / Current sales level =($612,000 - $504,000) / $612,000 17.65% 58 Question - 6 Total $ 40 60 Sales 61 Variable expenses 62 Contribution 63 Fixed expenses 64 Net Operating income 679,000 428,400 250,600 151,200 99,400 Per Unit $ $ $ 65 Contribution margin ratio =Contribution/Sales =$250,600 / $679,000 37% =$99,400 - $32,400 Net operating income increases by F 67,000

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