Lindon Company is the exclusive distributor for an automotive product that sells
ID: 2488443 • Letter: L
Question
Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company’s fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year.1. Variable expenses per unit = 31.50 2. Break-even point in unit sales and in dollar sales = 14,000 and 700,000 3. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by 3.70 per unit. What is the company's new break-even point in unit sales and in dollar sales? Using the equation method 4 What is the breakeven point in unit sales and in dollar sales? using the formula method 5. What amount of unit sales and dollar sales is required to earn an annual profit of 92,500 using the formula method 6. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.70 per unit. What is the company's new break-even point in unit sales and in dollar sales? using formula method
Explanation / Answer
= Sales Price- Contribution Per Unit
= 40- (40 x 30%)
=40-12
=$28
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Let be ‘x’ be break even point units
px = vx + FC
Where,
p is the price per unit,
x is the number of units,
v is variable cost per unit and
FC is total fixed cost
=40x=28x+180,000
=40x-28x =180,000
=12x= 180,00
X=180,000/12
X=15,000 units
Hence Break even point in units = 15,000
Break even point in $= 15,000 x 40=$600,000
3. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by 3.70 per unit.
What is the company's new break-even point in unit sales and in dollar sales? Using the equation method:
New Variable Cost = $28-$3.70=$24.3
Let be ‘x’ be break even point units
px = vx + FC
Where,
p is the price per unit,
x is the number of units,
v is variable cost per unit and
FC is total fixed cost
=40x=24.3x+180,000
=40x-24.3x =180,000
=15.7x= 180,00
X=180,000/15.7
X=11,465 units
Hence Break even point in units = 11,465
Break even point in $= 11,465 x 40=$458,600
4 What is the breakeven point in unit sales and in dollar sales? using the formula method
Contribution per Unit= 40-24.3=15.7
Break Even Point in Units= Fixed Cost/ Contribution Per unit
=180,000/15.7
=11,465
Contribution Margin Ratio %= Contribution Per Unit/ Sales x 100
=15.7/40 x 100
=39.25%
Break Even Point In $= Fixed Cost/ Contribution Margin Ratio%
=180,000/39.25%
=458,600
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5. What amount of unit sales and dollar sales is required to earn an annual profit of 92,500 using the formula method
Target sales in units= Target profit+ Fixed Cost / Contribution Per unit
=92,500+180,000/12
=22,708.33
Target sales in $= Target profit+ Fixed Cost / Contribution Margin Ratio%
=92,500+180,000/30%
=$ 908,333
I think 4 and 6 repeated any how I have answered
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