Question

Wesley Company manufactures and sells a single product. The company's sales and expenses for last quarter follow: Sales Less: Variable expenses Total $450,000 270,000 Per Unit $ 90 54 Contribution margin 180,000 $ 36 Less: Fixed expenses 90,000 Net operating income $ 90,000 Required: 1. What is the quarterly break-even point in units sold and in sales dollars? Break-even point in units sold Break-even point in sales dollars

Answer 1

- Break even point (units) = Fired cost contribution (unit Fixed cost contribution margin ratio. (dollars) - - B.E.p (units ) B.E.P dollars) = $90000 36 2500 units $ 40000 36 X100) Tao $ 90000 40.1 -$225000 Q contribution margin is 2500 units X36 at Break even point = $ 90000 3 Targeted profit = €22000 fixed cost & target profit contribution (unit $ 90000 + 122400 36 15900 units

Sales Variable cost contribution ussi- fixed cost $ 531000 ($ 318 600) &12400 ($9000 o) 90/unit 5u/unit 36/unit. Net Income. 122400 © Margin of Safety (dollars) (mos) Total sales - B.E.P Sales SU SOO00 - 225000 Percentage T 5225000 of Broop mos sales 225000 x 100 450000 = 150% © If the sales increases by 518000 Variable expenses also incea 10800 cox 54 ) same contribution margin ratio will be that is 40% Net operating income will increase by (18000 - 10800) = $7200 Since, fined costs are constant.