Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 600,000 $ 40 Variable...

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Accounting

Menlo Company distributes a single product. The company’s salesand expenses for last month follow:
Total Per Unit
Sales $ 600,000 $ 40
Variable expenses 420,000 28
Contribution margin 180,000 $ 12
Fixed expenses 153,600
Net operating income $ 26,400

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 $56,400?
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 $60,000per 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

3.6 Ratings (437 Votes)

Req 1 Break evenunits total fixed costcontribution margin per unit 15360012 12800 units Break evensales 1280040 512000 Break even point in unit sales 12800 units Break even See Answer

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	Total		Per Unit
Sales	$	600,000	$	40
Variable expenses		420,000		28
Contribution margin		180,000	$	12
Fixed expenses		153,600
Net operating income	$	26,400