Question

Menlo Company distributes a single product. The company’s sales and expenses for last month follow:

	Total			Per Unit
Sales	$	616,000		$	40
Variable expenses		431,200			28
Contribution margin		184,800		$	12
Fixed expenses		153,600
Net operating income	$	31,200

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 $58,800?

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 the company can sell more units thereby increasing sales by $57,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Answer 1

40 sale price per unit Variable expense Perunit Contribution per unit (28) contribution margin Ratio 2012 fonden + 20 b fixed cost Break Even point in units a $ 12 trov 200) 12 X 100 40 coa 30% contribution perunit Ookp $153600 12 the = [12800 units fire bgrotelleros (atau Ni Fixed cost Break even point in Dollars sales = contribution margin Ratio 153000 - $512ooo contribution margin at Break Even point - 12800 unitsx 12 onemos op -T8153600 units to be sold to earn Faed cost tprofit Cheers Requered Proht ( contribution pes unit ocxocok $1536004 58800 17 700 units REDMI NOTE 6 PRO

Incomestatement timuret sig sta Particulars Amant ($) 70 08000 Sales (17700x yo) less: Variable cost (495600) oitot nipesse notedtros contribution 2 12 400 less: fixed cost (153600) atiri Inoa Nov 3 toard aprofit 58800 Profit margin of scofety = contribution perunit Hoog bort in units) 2910 e 2olor Style 31200 12 2600 units margin of safety en value) Tovuz &L 31200 0.3 copren croit =B1oyooo contribution margin Ratio = 12 Nova 2oon to To Rapo - 1 30% off to be Increase in Netoperating at Innease CM Insome Borut insales =57000x30% $ 17100 REDMI NOTE 6 PRO -