Assume that by using a more efficient shipper, the company is able to reduce its
ID: 341041 • Letter: A
Question
Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.90 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 point answers to the nearest whole number.)
What is the break-even point in unit sales and in dollar sales? (Do not round intermediate calculations.)
What amount of unit sales and dollar sales is required to earn an annual profit of $85,500? (Do not round intermediate calculations.)
Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.90 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 point answers to the nearest whole number.)
c.Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.90 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 point answers to the nearest whole number.)
3. Repeat (2) above using the formula method. a.What is the break-even point in unit sales and in dollar sales? (Do not round intermediate calculations.)
b.What amount of unit sales and dollar sales is required to earn an annual profit of $85,500? (Do not round intermediate calculations.)
c.Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.90 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 point answers to the nearest whole number.)
3 2.85 points value: Lindon Company is the exclusive distributor for an automotive product that sells for $45.00 per unit and has a CM ratio of 38%. The company's fixed expenses are $495,900 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.) ariable expenses 27.90 per unit 2. Use the equation method: a. What is the break-even point in unit sales and in dollar sales? (Do not round intermediate calculations.) 29,000 Break-even point in unit sales Break-even point in dollar sales $ 513,000 b. What amount of unit sales and dollar sales is required to earn an annual profit of $85,500? (Do not round intermediate calculations.) Sales level in units Sales level in dollarsExplanation / Answer
SOLUTION
1. Variable expense = Sales price - Contribution per unit
= $45.00 - ($45.00 * 38%)
= $45.00 - $17.10
= $27.90
2A. Breakeven point in units = Contribution margin per unit * Units - Fixed Expense
= $17.10 Q - $495,900
$495,900 = $17.10 Q
Q = 29,000 units
Breakeven point in sales dollar = Variable expense + Fixed Expense
Q = 0.62Q + $495,900
Q - 0.62Q = $495,900
0.38Q = $495,900
Q = 1,305,000
2B.
Profit= (Unit CM * Q) - Fixed expenses
$85,500 = $17.1 Q - $495,900
$17.1 Q = $495,900 + $85,500
$17.1 Q = $581,400
Q = 34,000 units
In sales dollar = 34,000 units * $45 = $1,530,000
2C. New variable expense = $27.90 - $3.90 = $24.00
Profit = (Unit CM * Q) Fixed expenses
$0 = $21Q - $495,900
Q = 23,614 units
In sales dollar = 23,614 units * 45 = $1,062,630
3A. Unit sales to break even = Fixed expenses / CM per unit
= $495,900 / $17.1 = 29,000 units
Dollar sales to break even = Fixed expenses / CM ratio
= $495,900 / 38% = $1,305,000
3B. Unit sales to attain the target profit = (Profit + Fixed expenses) / Unit CM
= ($85,500 + $495,900) / $17.10
= $581,400/ $17.10 = 34,000 units
Dollar sales to attain the target profit = (Profit + Fixed expenses) /CM ratio
= ($85,500 + $495,900) / 38%
= $581,400/ 38% = $1,530,000
3C. New variable expense = $27.90 - $3.90 = $24.00
Unit sales to break even = Fixed expenses / CM per unit
= $495,900 / $21 = 23,614 units
Dollar sales to break even = Unit sales to break even * sales price
23,614 units * 45 = $1,062,630
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