Question

Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses Total $ 314,000 219,800 Per Unit $ 20 14 $ 6 Contribution margin Fixed expenses 94,200 78,000 Net operating income $ 16, 200

Answer 1

314000 20 14 78000 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)=(20-14) CM Ratio =( CM/Selling Price) =(6/20) 1. Compute the Break Even pont 1 Break Even in Unit Sales =( Fixed Cost / CM Per unit) = (78000/6) 2.Brake Even in Dollar sales = ( Fixed Cost/ CM ratio)=(78000/30%) 20 14 6 30% 13000 Units 260000 Dollars

3. a) Units to get the target profit of $34800 (Fixed cost + target profit)/ CM per unit =(78000+34800)/6 18800 3.B) Verify the answer with Contribution margin Income Statement Contribution Margin Statement Total Per unit sale (18800*20) 376000 20 Variable Expenses (18800*14) 263200 14 Contibution margin (18800*6) 112800 6 Fixed Expenses 78000 Net Operating Income 34800

4. Units to get the After Tax Profot of $34,800 ((Fixed cost +( target profit)/(1-Tax))/ CM per unit =( 78000+(34800/0.70))/6 21286 Units

5 CM Ratio =( CM/Selling Price) Net Operating Income Increased by (0.30*80000) 30% 24000