Lindon Company is 2.00 points Exercise 5-14 Break-Even and Target Profit Analysi

Question

Lindon Company is 2.00 points Exercise 5-14 Break-Even and Target Profit Analysis [LO5-3, LO5-4, LO5-5, LO5-6 Lindon Company is the exclusive distributor for an automotive product that sells for $37.00 per unit and has a CM ratio of 35%. The company's fixed expenses are S220, 150 per year. The company plans to sell 18,000 units this year Required 1. What are the variable expenses per unit? (Round your answer to 2 decimal places.) 27 rut 2. Use the equation method: a. What is the break-even point in unit sales and in dallar sales? (Do not round intermediate calculations.) Break-even point in unit sales Break-even point in dollar sales F4 FI 8 4 2

Explanation / Answer

Req 1. Selling price: $ 37 CM ratio:35% VC ratio: 100-35 = 65% Variable cost: 37*65% = $24.05 Req 2: Let Units be X at break even point At break even point, Total sales = Total cost Total sales: 37*X = 37X Variable cost: 24.05X fixed cost: 220,150 37X = 24.05X + 220150 Number of units at break even 'X' = 17000 units Break even in $:17000 units *37 = $629000 Rreq 2-b: Desired profits: $64750 Now, as per equation, total sales = total cost +Desird profits 37X = 24.05 X+220150+64750 X, Number of units to be sold= 22,000 units Sales in $: 22000 units*37 = $814,000 Req 2-c Revised variable cost: 24.05-3.30 = 20.75 Break even point as per equation: 37 X = 20.75 X +220150 Number of units at break even = 13548 units Break even sales in $: 13548 units*37 =$ 501,276 Req 3-a: Contribution: sales -Variable cost per unit =37-24.05 = 12.95 per unit Breeak even units: Fixed cost / Contribution per unit = 220150 /12.95 = 17000 units Break even in $: Fixed cost / Cm ratio = 220150 /35% = $ 629,000 Req 3-b: Desired profits:64750 Desired contribution:64750+220150 = 284900 target sales sunits: Desired contribution / Contribution perr unit = 284900/12.95 = 22000 units target sales in $: Desired contribution/ CM ratio = 284900/35% = $ 814,000 Req 3-c: Revised Contribution: 12.95+3.30 = $16.25 pere unit CM ratio: 16.25/37 *100 =43.92% Breakeven units: Fixed cost / Contirbution per unit = 220150 /16.25 = 13548 units Break even in $: Fixed cost / Cm ratio = 220150 /43.92% = $501252

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.