A company distributes a single product. The company’s sales and expenses for las

Question

A company distributes a single product. The company’s sales and expenses for last month follows:
Per Unit Total
Sales $540,000 $30
Variable Expenses 324,000 18
Contribution Margin 216,000 12
Fixed Expenses 190,000
Net Operating Income 26,000


Required:
1.What is the monthly break-even point in units and in sales dollars?
2.What is the total contribution margin at the break-even point?
3.How many units would have to be sold each month to earn a target profit of 90,000? Use the formula method. Verify your answer be preparing a contribution format income statement at the target sales level.
4.What is the company’s CMR? If sales increase by $60,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Explanation / Answer

A company distributes a single product. The company’s sales and expenses for last month follows: Unit Total Sales $540,000 $30 Variable Expenses 324,000 18 Contribution Margin 216,000 12 Fixed Expenses 190,000 Net Operating Income 26,000 Required: 1.What is the monthly break-even point in units and sales dollars$ 2. What is the total contribution margin at the break even point? 3. How many units would have to be sold each month to earn a target prfit of 90,000?

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