Question

please answer all parts. Thanks!

Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total $ 632,000 442,400 189,600 151,200 $ 38,400 Per Unit $40 28 $ 12 Sales Variable expenses Contribution margin Fixed expenses Net operating income 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 $57,600? 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 $88,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Answer 1

632000 40 28 151200 40 Sales Revenue Selling Price Per unit Varaibel Expense Per unit Fixed Expenses Compute the CM ratio Selling Price Per unit Varaibel Expense Per unit Contribution Margin per unit (Selling Price - Varible Cost) CM Ratio =( CM/Selling Price 1. Compute the Break Even pont 1 Break Even in Unit Sales =( Fixed Cost / CM Per unit) 2.Brake Even in Dollar sales =( Fixed Cost/ CM ratio) 2. Determine the Contribution Margin at the Break even point Contribution Margin at the Break even point = Fixed Cost 3. a) Units to get the target profit of $57600 (Fixed cost + target profit)/ CM per unit 28 12 30% 12600 Units 504000 Dollars 151200 17400

3.B)Verify the answer with Contribution margin Income Statement Contribution Margin Statement sale Varaible Expenses Contibution margin Fixed Expenses Net Operating Income Total Per unit 696000 40 487200 281 208800 12 151200 57600 4. Compute the Margin of Safety Margin of Safety in dollars =(units *selling price - BEP Dollars) Margin of Safety in Percentage =(Margin of safety Dollars/ Actual sales ) 128000 Dollars 20.25% Percent CM Ratio =(CM/Selling Price) Net Operating Income Increased by (0.30*88000) 30% 26400