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 $35.00 per unit and has a CM ratio of 38%. The company's fixed expenses are $385,700 per year. The company plans to sell 30,000 units this year Required: 1. What are the variable expenses per unit? (Round your answer to 2 decimal places.) Variable expenses 21.70 per unift 2. Use the equation method a. What is the break-even point in unit sales and in dollar sales? (Do not round intermediate calculations.) Break-even point in unit sales Break-even point in dollar sales 29,000 1.015,000

Explanation / Answer

Contribution margin %= 38.00% Sales = 35 Per Unit Less: Variable Costs (100 % - 38% = 62%) 21.7 Per Unit 62% of $ 35 Contribution per unit 13.3 Per Unit CALCULATION OF THE BREAK EVEN POINT IN UNITS Break Even point =      Fixed Cost / Contribution Margin Per Unit Break Even point =       Fixed Cost = $               3,85,700 Divide By "/" By Contribution Margin Per Unit = $                           13 Break Even point =       29000 Units Answer = Break even point in units = 29000 Units CALCULATION OF THE BREAK EVEN POINT IN DOLLARS Break Even point =      Fixed Cost / Contribution Margin Ratio Break Even point =       Fixed Cost = $               3,85,700 Divide By "/" By Contribution Margin Ratio = 38% Break Even point in Dollars =       $             10,15,000 Answer = BEP in Dollars = $             10,15,000 Answer = b) Unit sales required to Earn $ 66,500 Profit Target Profit = ( Fixed Cost + target Income ) / Contribution Margin per unit Target Profit = Fixed Cost = $               3,85,700 Add: "+ " Target Income = $                   66,500 Equal to = $               4,52,200 Divide By "/"By Contribution marrgin per unit $                           13 Equal to =                 34,000.00 Units Sales in Dollars 34,000 Units X $ 35 = $             11,90,000 Answer = C) With reduce in variable costing by $ 4.50 Per unit Sales = 35 Per Unit Less: Variable Costing 17.2 Per Unit ($ 21.70 - $ 4.50 ) Contribution Margin per unit 17.8 Per Unit CALCULATION OF THE REVISE BREAK EVEN POINT IN UNITS Break Even point =      Fixed Cost / Contribution Margin Per Unit Break Even point =       Fixed Cost = $               3,85,700 Divide By "/" By Contribution Margin Per Unit = $                     17.80 Break Even point =       21669 Units Answer = Break even point in units = 21669 Units Answer = Break even point in Dollars = $               7,58,415 (21,669 units X $ 35)

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