Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 624,000 $ 40 Variable...

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Menlo Company distributes a single product. The company’s salesand expenses for last month follow:
Total Per Unit
Sales $ 624,000 $ 40
Variable expenses 436,800 28
Contribution margin 187,200 $ 12
Fixed expenses 148,800
Net operating income $ 38,400

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 $67,200?
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 $65,000per 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

4.3 Ratings (620 Votes)

Contribution per unit Selling price per unit Variable cost per unit 4000 2800 1200 per unit Contribution Margin Ratio Contribution per unit Selling Price per unit x 100 1200 4000 x 100 30 1 Monthly breakeven point in unit sales and in dollar sales BreakEven Point in unit sales BreakEven Point in unit sales Fixed See Answer

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Menlo Company distributes a single product. The company’s salesand expenses for last month follow:TotalPer UnitSales$624,000$40Variable expenses436,80028Contribution margin187,200$12Fixed expenses148,800Net operating income$38,400Required: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 $67,200?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 $65,000per month and there is no change in fixed expenses, by how muchwould you expect monthly net operating income to increase?

	Total		Per Unit
Sales	$	624,000	$	40
Variable expenses		436,800		28
Contribution margin		187,200	$	12
Fixed expenses		148,800
Net operating income	$	38,400