Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit...

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Accounting

Lindon Company is the exclusive distributor for an automotiveproduct that sells for $40 per unit and has a CM ratio of 40%. Thecompany’s fixed expenses are $264,000 per year. The company plansto sell 17,000 units this year. Required: 1. What are the variableexpenses per unit? 2. Use the equation method: a. What is thebreak-even point in unit sales and in dollar sales? b. What amountof unit sales and dollar sales is required to earn an annual profitof $70,000? c. Assume that by using a more efficient shipper, thecompany is able to reduce its variable expenses by $4 per unit.What is the company’s new break-even point in unit sales and indollar sales? . 3. Repeat (2) above using the formula method. a.What is the break-even point in unit sales and in dollar sales? b.What amount of unit sales and dollar sales is required to earn anannual profit of $70,000? c. Assume that by using a more efficientshipper, the company is able to reduce its variable expenses by $4per unit. What is the company’s new break-even point in unit salesand in dollar sales?

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SOLUTION 1 Variable expense Sales price Contribution per unit 40 40 40 40 16 24 2a Break even point in units Unit contribution margin Quantity Fixed expense 16 Q 264000 16 Q 264000 Q 26400016 16500 Break even point in units 16500 Break even point in dollars Sales Variable expenses Fixed expenses Q 06 Q See Answer

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