Lindon Company is the exclusive distributor for an automotive product that sells

Question

Lindon Company is the exclusive distributor for an automotive product that sells for $34.50 per unit and has a CM ratio of 30%. The company’s fixed expenses are $211,140 per year. The company plans to sell 8,800 units this year.

Required:

What are the variable expenses per unit? (Round your answer to 2 decimal places.)

     

What is the break-even point in unit sales and in dollar sales?

          

What amount of unit sales and dollar sales is required to earn an annual profit of $51,750?

          

Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.45 per unit. What is the company’s new break-even point in unit sales and in dollar sales?

          

What is the break-even point in unit sales and in dollar sales?

          

What amount of unit sales and dollar sales is required to earn an annual profit of $51,750?

          

Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.45 per unit. What is the company’s new break-even point in unit sales and in dollar sales?

1.

What are the variable expenses per unit? (Round your answer to 2 decimal places.)

Explanation / Answer

Solution:

Sale price = 34.5 Contribution Margin ratio = 30 % * Sales Contribution= 30 % * 34.50 10.35 1 Variable cost = Sales - Contribution 24.15 Break even point = Fixed cost / CM Ratio Fixed cost 211,140 Contribution Margin ratio = 30 % * Sales 30% 2 Break even point in Sales 703,800 Break-even point in units = Fixed cost / Contribution margin per unit Fixed cost 211,140 Contribution 10.35 3 Break even point in units 20,400 Units Required to earn profit - 51,750= Fixed cost + Desired Profit / Contribution margin per unit Fixed cost 211,140 Desired profit 51,750 Contribution 10.35 4 Units Required to earn profit 25,400 Sales reuired to earn desired profit = Fixed cost + Desired profit / CM Ratio 5 Sales reuired to earn desired profit = 876,300

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