Question

ch Menlo Company distributes a single product. The company's sales and expenses for last month follow Per Unit Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 600,000 422.800 181,200 26.000 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 $80,4007 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 $86,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3A Reg 3 Reg4 Reg 5 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 dollar sales

Answer 1

1. Break even point in Units is 12100 & in Dollar is $484000

Monthly Break Even Point (in Unit) Fixed Costs Selling price per unit- Variable Cost per unit 145200 12 12100 Units Monthly Break Even Point (in Dollar Sales) Fixed Costs Contribution Margin 145200 0.3 484000 Contribution Margin= Total Revenue- Total Variable cost Total Revenue 181200 604000 0.3

2. Contribution Margin at break even in terms of dollar value is $145200, which will cover the fixed cost.

3A. 18800 Units to be sold to attain the target profit

3B. Statement below-

Contribution Margin= Fixed expense+profit

=80400+145200

=225600

Profit per unit is 12 considering sales is made at 40 per unit and cost incurred is 28 per unit

Number of units= 225600/12

=18800 units

Sales Variable expense Contribution Margin Fixed Expense Net operating income Units Per unit 752000 18800 526400 18800 28 225600 18800 12 145200 80400

4. Margin of safety

Margin of safety (in Dollar)= Current Sales- Break even sales 120000 Margin of safety (in Percentage)= Current Sales Break even sales Current Sales 120000 604000 19.87