Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses Contribution margin Fixed expenses Net operating income. Total $ 300,000 210,000 90,000 74,400 $ 15,600 Per Unit $ 20 14 $ 6 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 $29,400? 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 $60,000 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.
Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses Contribution margin Fixed expenses Net operating income. Total $ 300,000 210,000 90,000 74,400 $ 15,600 Per Unit $ 20 14 $ 6 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 $29,400? 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 $60,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Transcribed Image Text:Menlo Company distributes a single product. The company's sales and expenses for last month follow:
Sales
Variable expenses.
Contribution margin
Fixed expenses
Net operating income.
Total
$ 300,000
210,000
90,000
74,400
$ 15,600
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 $29,400?
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 $60,000 per month and there is no
change in fixed expenses, by how much would you expect monthly net operating income to increase?
Req 1
Per
Unit
$ 20
14
$6
Complete this question by entering your answers in the tabs below.
Req 2
Req 3A
Req 3B
Req 4
Req 5
Transcribed Image Text:Lindon Company is the exclusive distributor for an automotive product that sells for $54.00 per unit and has a CM ratio of 30%. The
company's fixed expenses are $388,800 per year. The company plans to sell 28,600 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 $226,800 per year?
4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $5.40 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 $226,800?
1. Variable expense per unit
2. Break-even point in units
2. Break-even point in dollar sales
3. Unit sales needed to attain target profit
3. Dollar sales needed to attain target profit
4. New break-even point in unit sales
4. New break-even point in dollar sales
4. Dollar sales needed to attain target profit
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