Question

Leam H Mommer150 m Campus Secure Homework Help Seven Check Menlo Company distributes a single product. The company's sales and expenses for last month follow Total Per Unit 5 620,eee Sales Variable expenses Contribution margin Fixed expenses het operating Income 186, 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 $66.000? 3-5 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 595,000 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 Reo 2 Reg 34 Reg 38 Reg 4 Score answer >

Answer 1

Given

Contribution per unit = 12               fixed expenses = 151200

selling price = 40                              Net operating income = 34800

variable cost = 28

sales = 620000                               no of units sold =   620000/40 = 15500

       contribution margin ratio = ( contribution / sales )*100

                                                 = (12/40) *100 = 30%

1 breakeven

   in units =      fixed cost / contribution per unit   =    151200/12 = 12600

in dollar sales =    fixed cost / contribution margin ratio = 151200/30% = 504000

2)

Without computation we can say that

contribution at breakeven sales = fixed cost = 151200

3)

      Units to be sold to earn required profit =   (fixed cost + required profit ) / contribution per unit

      =       ( 151200+66000)/12

      =           18100 units

4)  

      Margin of safety

• In units = current sale units – breakeven sale units

                                            = 15500 – 12600

                                             = 2900

                          In sales =       current sales – breakeven sales

                                        =      620000 – 504000

                                        =      116000

5)   contribution margin ratio = ( contribution / sales )*100

                                                 = (12/40) *100 = 30%

Net operating income increases 35% 0f sales = 95000*35%

                                                                           = 33250