Lindon Company is the exclusive distributor for an automotive product that sells
ID: 2525485 • Letter: L
Question
Lindon Company is the exclusive distributor for an automotive product that sells for $42.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $275,940 per year. The company plans to sell 6,800 units this year.
Required:
What are the variable expenses per unit? (Round your answer to 2 decimal places.)
Variable expenses per unit
What is the break-even point in unit sales and in dollar sales?
Break-even point in unit sales
Break-even point in dollar sales
What amount of unit sales and dollar sales is required to earn an annual profit of $63,000?
Sales level in dollars
Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.20 per unit. What is the company’s new break-even point in unit sales and in dollar sales?
New break-even point in dollar sales
a. What is the break-even point in unit sales and in dollar sales?
Break-even point in unit sales
Break-even point in dollar sales
b. What amount of unit sales and dollar sales is required to earn an annual profit of $63,000?
Sales level in dollars
Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.20 per unit. What is the company’s new break-even point in unit sales and in dollar sales?
New break-even point in unit sales
New break-even point in dollar sales
Lindon Company is the exclusive distributor for an automotive product that sells for $42.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $275,940 per year. The company plans to sell 6,800 units this year.
Explanation / Answer
Answers
A
Sale Price per unit
$ 42.00
B
CM Ratio
30%
C=A x B
Unit Contribution
$ 12.60
D=A-C
Unit Variable cost [Answer 1]
$ 29.40
A
Fixed Cost
$ 2,75,940.00
B
Unit Contribution
$ 12.60
C=A/B
Break Even point in Unit Sales [Answer 2(a)]
$ 21,900.00
D
CM Ratio
30%
E=A/D
Break even point in dollar sales [Answer 2(a)]
$ 9,19,800.00
A
Fixed Cost
$ 2,75,940.00
B
Expected annual profits
$ 63,000.00
C=A+B
Total contribution required
$ 3,38,940.00
D
Unit contribution
$ 12.60
E=C/D
No. of units to earn target profit [Answer 2&3 (b)]
26900
F=E x $42 per unit
Amount of Sale dollars [Answer 2&3 (b)]
$ 11,29,800.00
A
Sale Price per unit
$ 42.00
B = $29.4 - 4.2
New variable cost per unit
$ 25.20
C =A-B
New contribution margin
$ 16.80
D=C/A
New CM ratio
40%
E
Fixed Cost
$ 2,75,940.00
F=E/C
Break Even point in Unit Sales [Answer 2(c)]
16425
G=E/D
Break even point in dollar sales [Answer 2(c)]
$ 6,89,850.00
A
Sale Price per unit
$ 42.00
B
CM Ratio
30%
C=A x B
Unit Contribution
$ 12.60
D=A-C
Unit Variable cost [Answer 1]
$ 29.40
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