Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 302,000 $ 20 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 $ 302,000 $ 20
Variable expenses 211,400 14
Contribution margin 90,600 $ 6
Fixed expenses 72,600
Net operating income $ 18,000

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 $40,800?
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 $88,000per 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

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SOLUTION 1 Break even point in unit sales Fixed costs Contribution margin per unit 72600 6 12100 units Contribution margin ratio Contribution margin sales 100 6 20 100 30 Break even point in See Answer

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	Total		Per Unit
Sales	$	302,000	$	20
Variable expenses		211,400		14
Contribution margin		90,600	$	6
Fixed expenses		72,600
Net operating income	$	18,000