tru eztomheducation.com/hm.ipx Lindon Company is the exclusive distributor for a

Question

tru eztomheducation.com/hm.ipx Lindon Company is the exclusive distributor for an automotive product that sells for $35.00 per unit and has a CM ratio of 34%. The company's fixed expenses are S285 600 per year The company plans to sell 25,000 units this year Required 1. What are the variable expenses per unit? (Round your answer to 2 decimal places.) per unit 2. Use the equation method a. What is the break-even point in unit sales and in dolar sales? (Do not round intermediate calculations.) Break-even point in unit sales Break-even point in dollar sales b. What amount of unt sales and collar sales reqred to ea an anual proft of $9.500? (Do not round intermediate calculations.) Sales level in units Sales level in dollars c Assume that by using a moré efficient shipper, the company is able to reduce its variable expenses by $3.20 per unit. What is the company's new break-even point in unit sales and in dollar sales? (Do not round intermediate calculations. Round up break even number.) point answers to the nearest whole New break-even point in unit sales New break-even point in dollar sales

Explanation / Answer

Lindon Company 1) Contribution Margin Ratio=(Contribution per uniit /Sales price per unit)*100 Contribution per unit=Sales Per Unit-Variable Cost Per Unit Contribution Margin Ratio=($35-Variable Cost Per Unit)/$35 34%*35=$35-Variable cost per unit Variable cost per unit=$35-$11.9 Variable cost per unit=$23.10 Variable Expenses Per Unit= $                23.10 2) Breakeven Point in Units=Fixed Expenses/contribution Margin Per Unit Breakeven Point in Units=285600/($35-$23.10) 24000 a) Breakeven Point in Dollars=Fixed Expenses/Contribution Margin Ratio Breakeven Point in Dollars=$285600/34% $      840,000.00 or Brekeven Sales (Units)* Sales Price Per Unit=(24000*$35) $      840,000.00 b) Breakeven Point in Units when Expected Profit=$59500 Breakeven Point in Units when Expected Profit=(Fixed Expenses+Expected Profit )/Contribution Margin Per Unit Breakeven Point in Units=($285600+$59500)/($35-$23.10) 29000 Breakeven Point in Dollars when Expected Profit=$59500 Breakeven Point in Dollars when Expected Profit=(Fixed Expenses+Expected Profit )/Contribution Margin Ratio Breakeven Point in Units=($285600+$59500)/34% $ 1,015,000.00 c) When Variable Cost is reduced by $3.20 Per Unit New Variable cost per unit=($23.10-$3.20) Per Unit 19.9 Contribution Margin Per Unit=($35-$19.90) 15.1 Contribution Margin Ratio=($35-$19.90)/$35 43.14% 3a) Breakeven Point in Units=Fixed Expenses/contribution Margin Per Unit Breakeven Point in Units=285600/($35-$23.10) 24000 3b Breakeven Point in Dollars=Fixed Expenses/Contribution Margin Ratio Breakeven Point in Dollars=$285600/34% $      840,000.00 or Brekeven Sales (Units)* Sales Price Per Unit=(24000*$35) $      840,000.00 Breakeven Point in Units when Expected Profit=$59500 Breakeven Point in Units when Expected Profit=(Fixed Expenses+Expected Profit )/Contribution Margin Per Unit Breakeven Point in Units=($285600+$59500)/($35-$23.10) 29000 Breakeven Point in Dollars when Expected Profit=$59500 Breakeven Point in Dollars when Expected Profit=(Fixed Expenses+Expected Profit )/Contribution Margin Ratio Breakeven Point in Units=($285600+$59500)/34% $ 1,015,000.00 3c When Variable Cost is reduced by $3.20 Per Unit New Variable cost per unit=($23.10-$3.20) Per Unit 19.9 Contribution Margin Per Unit=($35-$19.90) 15.1 Contribution Margin Ratio=($35-$19.90)/$35 43.14%

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