rork Menlo Company distributes a single product The company\'s sales and expense
ID: 2337015 • Letter: R
Question
rork Menlo Company distributes a single product The company's sales and expenses for last month tollow 640,0ee 448,000 92,00 Contribution argin Plsed espenses set operating Income 5 12 42,000 Required 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 pont 3-a How many 4 Reter to the oniginal data Compute the company's margin of safety in both doliar and percentage tems 5 What is wouid you expect monthly net operating units would have to be sold each month to attain a target profit of $55.200 the companys CM ratio? H sales increase by $59,000 per month and there is no change in fised expenses by how much income to increase Complete this qnestion by entering your answers in the tabs bedow what is the monthly break even point in unit sales and in dollar sateExplanation / Answer
1. Breakeven point in units = Fixed Expenses / Unit Contribution Margin
=$150,000/$12
=12,500 Units.
2. At breakeven point, total contribution margin is equals to total Fixed Costs. In this case total contribution margin =12,500 *$12=$150, 000 this is total fixed costs.
3. Targeted Profit =$55, 200
Units required =(fixed costs+targeted profit) /Unit Contribution Margin
=($150, 000+$55,200)/$12
=$205,200/$12
=17,100 units
4. Margin of safety in dollars =actual sales-breakeven sales
=$640,000-(12,500*$40)
=$640,000-$500,000=$140,000
Margin of safety in percentage =margin of safety in dollars /actual sales
=$140,000/$640,000 = 0.21875 or 21.875%
5. Contribution margin ratio = unit CM/Unit sale price
=$12/$40
=0.3 or 30%
If sales increased by $59,000,then revised sales is $699,000
Contribution =$699, 000*30%
=$209, 700
Net income =$209,700-150,000=$59,700
Increase in net income =$59, 700-$42,000=$17, 700
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