Menlo Company distributes a single product. The company’s sales and expenses for last month follow:
1. What is the monthly break-even point in unit sales and in dollar sales?
2. Without resorting to computations, what is the total contribution margin at the break-even point?
3. a. How many units would have to be sold each month to earn a target profit of $63,600? Use the formula method.
3. b. Verify your answer by preparing a contribution format income statement at the target sales level.
4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.
5. What is the company’s CM ratio? If monthly sales increase by $97,000 and there is no change in fixed expenses, how much would you expect monthly net operating income to increase?
Menlo Company distributes asingle product. The companyâs sales and expenses for last monthfollow:
Total
Per Unit
Sales
$
308,000
$
20
Variableexpenses
215,600
14
Contributionmargin
92,400
$
6
Fixed expenses
72,600
Net operatingincome
$
19,800
Required:
1.
What is themonthly break-even point in unit sales and in dollar sales?
2.
Withoutresorting to computations, what is the total contribution margin atthe break-even point?
3-a.
How many unitswould have to be sold each month to earn a target profit of$30,000? Use the formula method.
3-b.
Verify your answerby preparing a contribution format income statement at the targetsales level.
4.
Refer to the original data. Compute the company's margin ofsafety in both dollar and percentage terms. Round yourpercentage answer to 2 decimal places (i.e .1234 should be enteredas 12.34).
5.
What is the companyâs CM ratio? If monthly sales increase by$81,000 and there is no change in fixed expenses, by how much wouldyou expect monthly net operating income to increase?
