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Connect C Loose Leat For Managerial Ac X Stice LA Child Development C How to Apply for a” Find a Doctor add mom anywhere El Yahoo! 吐Apple D Disney E ESPN-Imported From Safari Saved Help Save & Exit Submi mework Check my work Menlo Company distributes a single product. The company’s sales and expenses for last month follow Total 636,000 445,200 90,800 r Unit s 40 Sales 28 s 12 iable expenses Contribution margin Pixed expenses set operating incone s 40,800 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 $75,600? 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. tis the company’s CM ratio? If sales increase by $58,000 per month and there is no change in fixed expenses, by how much 5 Wha would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below.
Expert Answer
Solution
1.
Unit sales to break even=fixed expenses/unit contribution margin
=$150,000/$12
=12,500 units
Break even sales in dollar=12,500×$40
=$500,000
2. Total contribution margin at break even point=$150,000
Because at break even point contribution margin is equal to fixed costs as there is no profit or loss at this point.
3.a.
Units sold to attain target profit=(target profit+fixed expenses)/contribution margin per unit
=(75600+150,000)/$12
=18,800 unit
3.b. contribution margin income statement:
Sales(18800×$40)=$752,000
Less variable costs(18800×$28)=$526,400
Contribution margin=$225,600
Less fixed costs=$150,000
Net operating income=$75,600
4. Margin of safety in dollars=Total sales-breakeven sales
=$636,000-$500,000
=$136,000
Margin of safety in % term=margin of safety in dollars/total sales
=$136,000/636,000
=21.38%
