Question

Lindon Company is the exclusive distributor for an automotive product that sells for $58.00 per unit and has a CM ratio of 30%. The company's fixed expenses are $435,000 per year. The company plans to sell 30,000 units this year. Required: 1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.) 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $261,000 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $5.80 per unit. What is the company's new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $261,000? 1. Variable expense per unit 2. Break-even point in units Break-even point in dollar sales 3. Unit sales needed to attain target profit Dollar sales needed to attain target profit 4. New break-even point in unit sales New break-even point in dollar sales Dollar sales needed to attain target profit

Answer 1

1) variable cost per unit = 58*70% = 40.60 per unit

2) Break even unit = Fixed cost/CM per unit = 435000/17.40 = 25000 Units

Break even sales = 25000*58 = $1450000

3) Required unit = (435000+261000)/17.40 = 40000 Units

required sales = 40000*58 = $2320000

4) New break even unit = 435000/23.20 = 18750 Units

New break even sales = 18750*58 = $1087500

Required sales = (435000+261000)/.40 = $1740000