Question

Menlo Company distributes a single product. The company's sales and expenses for last month follow Sales Variable expenses 31382,600 211,400 Contribution margin Fixed expenses 90,600 76,89€ Net operating income 13,800 Required: 1. What is the monthly break-even point in unit sales and in dollar sales? units Break-even point in unit sales Break-even point in sales dollars 2. Without resorting to computations, what is the total contribution margin at the break-even point? Total contribution maroin

Answer 1

ANSWER:

(1)

Contribution margin ratio = contribution margin/sales

= $90600/$302000 = 30%

Break even point (unit sales) = fixed expenses/contribution margin per unit

= $76800/$6

= 12800 units

Break even point (dollar sales) = fixed expenses/contribution margin ratio

= $76800/30%

= $256000

(2)

Break even point is the Level of contribution which can cover fixed expenses.

Therefore total contribution margin at break even point is equal to fixed expenses.

therefore in this case total contribution margin at break even point = $76800