Menlo Company distributes a single product. The company’s salesand expenses for last month follow:Total...Menlo...

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Accounting

Menlo Company distributes a single product. The company’s salesand expenses for last month follow:
Total Per Unit
Sales 300,000 20
Variable expenses 210,000 14
Contribution margin 90,000 6
Fixed expenses 72,600
Net operating income 17,400
Required:
1. What is the monthly break-even point in unit sales and indollar sales?
2. Without resorting to computations, what is the totalcontribution margin at the break-even point?
3-a. How many units would have to be sold each month to attain atarget profit of $30,600?
3-b. Verify your answer by preparing a contribution formatincome statement at the target sales level.
4. Refer to the original data. Compute the company's margin ofsafety in both dollar and percentage terms.
5. What is the company’s CM ratio? If sales increase by $56,000per month and there is no change in fixed expenses, by how muchwould you expect monthly net operating income to increase?

Answer & Explanation Solved by verified expert

3.9 Ratings (522 Votes)

1 Monthly breakeven point in unit sales Fixed Expenses Unit Contribution Margin 72600 6 12100 units Monthly breakeven point in dollar sales Fixed Expenses Contrbution See Answer

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Transcribed Image Text

In: AccountingMenlo Company distributes a single product. The company’s salesand expenses for last month follow:Total...Menlo Company distributes a single product. The company’s salesand expenses for last month follow:TotalPer UnitSales300,00020Variable expenses210,00014Contribution margin90,0006Fixed expenses72,600Net operating income17,400Required:1. What is the monthly break-even point in unit sales and indollar sales?2. Without resorting to computations, what is the totalcontribution margin at the break-even point?3-a. How many units would have to be sold each month to attain atarget profit of $30,600?3-b. Verify your answer by preparing a contribution formatincome statement at the target sales level.4. Refer to the original data. Compute the company's margin ofsafety in both dollar and percentage terms.5. What is the company’s CM ratio? If sales increase by $56,000per month and there is no change in fixed expenses, by how muchwould you expect monthly net operating income to increase?

	Total	Per Unit
Sales	300,000	20
Variable expenses	210,000	14
Contribution margin	90,000	6
Fixed expenses	72,600
Net operating income	17,400