Can Anyone Please Help?? Clock Company sells a single product. The company\'s sa

Question

Can Anyone Please Help??

Clock Company sells a single product. The company's sales and expenses for a recent month follow:

                                         TOTAL                PER UNIT

Sales                               $600,000             $40

Les Variable Expenses    420,000                28

Contribution Margin       180,000                $12

Less fixed expenses        150,000

Net Operating Income      $30,000

a.) What is the monthly break-even point in units sold AND in sales dollars?

b.) Without resorting to computations, what is the total contribution margin at the break even point?

c.) How many units would have to be sold each month to earn a minimum target profit of $18,000? Use the Contribution Margin Method. Verify your answer by Preparing a Contribution Income Statement at the target level of sales.

d) Refer to the original data. Compute the company's margin of safety in BOTH Dollar and Percentage terms.

e) What is the company's CM ratio? If monthly sales increase by $80,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

PLEASE answer all questions (there are multiple questions in each question)

These questions are so VERY IMPORTANT - THANK You very much :)

Explanation / Answer

a) Break Even Point $ per Unit No of Units Sales        600,000               40             15,000 Less:- Variable Cost        420,000               28             15,000        180,000               12             15,000 Less:- Fixed Cost        150,000 Net Profit           30,000 BEP (in Unit) = Fixed Cost/Contribution Per unit = 150000/12 = 12500 Units BEP in $ = 12500 X 40 = $ 500000 b) Contribution Margin at Break even point No of Units X Contribution per unit = 12500 X 12 = $ 150000 In other words, at BEP contribution margin is always equal to fixed cost. c) No of Units to be sold for making profit of $ 18000 Total Contribution Required = Fixed cost + required profit = 150000+18000 = $ 168000 No of Units sold = $ 168000/12 = 14000 Units d) Margin of Safety Margin of Safety unit based = (Current sale- BEP sale)/Sale price per unit = (15000-12500)/40 = 62.5% Margin of Safety Budget Based = (Current sale- BEP sale)/current sales = (600000-500000)/600000= 16.67% e) Contribution Ratio after increase in Sales by $80000 No of Unit extra sold = $ 80000/40= 2000 units Total Unit will be sold = 15000+2000 = 17000 units Contribution of 17000 units = 17000X 12 = $ 204000 Sales Value = $ 600000+$80000 = $680000 Contribution margin Ratio = Contribution/sales X100 = 204000/680000X100 = 30% There is no change in contribuiton margin ratio from the previous because there is no change in the sales price and variable cost. in other words there is no change in contribution. Net income will be = Contribution - Fixed cost = $ 204000- $ 150000= $ 54000. Net income increase by $ 54000- $ 30000= $ 24000.

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