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 $34.00 per unit and has a CM ratio of 30% . The company's fixed expenses are $193,800 per year. The company plans to sell 21,600 units this year. Required 1. What are the variable expenses per unit? 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $91,800 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.40 per unit. What is the company's new break-even point in unit sales and in dollar sales? 1. Variable expense per unit 2. Break-even point in units Break-even point in dollar sales 3. Unit sales needed to attain target profit Dollar sales needed to attain target profit 4. New break-even point in unit sales New break-even point in dollar sales Doller sales needed to attain target profit

Explanation / Answer

Calculate following :

1. Variable expense per unit = 34*70% = 23.8 per unit

2. Break even point in units = 193800/10.20 = 19000 units

Break even sales = 19000*34 = 646000

3. Units sales needed to attain target profit = (193800+91800)/10.20 = 28000 units

Dollar sales needed to attain target profit = 28000*34 = 952000

4. New break even point in unit sales = 193800/13.60 = 14250 units

New break even sales = 14250*34 = 484500

Dollar sales needs to attain target profit = (193800+91800)/13.60*34 = 714000

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