Question

Menlo Company distributes a single product. The company's sales and expenses for last month follow: Per Unit $ 40 Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 608,888 425,600 182,400 146,400 $ 36,000 S. 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 $69,600? 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 sales increase by $99,000 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. Reg 1 Reg 2 Reg 3A Reg 3B Reg 4 Req 5 What is the monthly break-even point in unit sales and in dollar sales? units Break-even point in unit sales Break-even point in dollar sales

Answer 1

1 Monthly Break-Even point
=Contibution/variable cost per unit
6514	units
$                          260,571	in $
2 Total contribution margin at breakven
=breakeven units x contribution per unit
$                       78,171.43
3a no of units to be sold for attaining $69600 profit
=(Fixed cost+ desired profit)/Contribution per unit
18000	units
3b Income statement at 18000 units
Particulars	Amount	Per unit
Sales	720000	40
Variable expenses	504000	28
Contribution margin	216000	12
Fixed expenses	146400
Net operating Income	69600
4 Margin of safety
Margin of safety in Units	=(Sales-break Even sales)/Current sales level x 100
In percentage	57.14%
In dollars	$ 347,428.57
5. What is CM ratio
= (Total revenue-Variable costs)/Total revenue
30%	or 0.3
If sales increased by $ 99000 and no increased in Fixed cost
Particulars	Amount	Per unit
Sales	707000	40
Variable expenses	494900	28
Contribution margin	212100	12
Fixed expenses	146400
Net operating Income	65700
units = Sales revenue/ per unit selling price
17675	units