Question

SIMPLE manufactures and sells a single product. The company’s sales and expenses for last quarter follow:...

SIMPLE manufactures and sells a single product. The company’s sales and expenses for last quarter follow: Total Per Unit Sales $600,000 $40 Less: Variable Expenses $420,000 $28 Contribution Margin $180,000 $12 Less: Fixed Expenses $146,520 Net Operating Income $33,480 Required: What is the monthly break-even point in units sold and in sales dollars? Without resorting to computations, calculate the total contribution margin at the break-even point. How many units would have to be sold each quarter to earn a target profit of $18,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target level of sales. Refer to the original data. Compute the company’s margin of safety for the quarter in both dollar and percentage terms. What is the company’s CM ratio? If quarterly sales increase by $80,000 and there is no change in fixed expenses, by how much would you expect quarterly net operating income to increase? (Do not prepare an income statement; use the CM ratio to calculate your answer.)

Homework Answers

Answer #1

1) Break even unit = 146520/12 = 12210 Units

Break even sales = 12210*40 = $488400

2) Total Contribution margin at break even = Fixed cost = $146520

3) Required unit = (146520+18000)/12 = 13710 Units

Contribution margin income statement

Total Per unit
Sales 13710*40 = 548400 40
Variable cost 383880 28
Contribution margin 164520 12
Fixed cost 146520
Net income 18000

4) Margin of safety = 600000-488400 = 111600

Margin of safety (%) = 111600/600000 = 18.6%

5) CM ratio = 12/40 = 30%

Net operating income increase by 80000*30% = 24000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
QUESTION 2 SPI-K manufactures and sells a single product. The company’s sales and expenses for last...
QUESTION 2 SPI-K manufactures and sells a single product. The company’s sales and expenses for last quarter follow: Total Per Unit Sales $600,000 $40 Less: Variable Expenses $420,000 $28 Contribution Margin $180,000 $12 Less: Fixed Expenses $146,520 Net Operating Income $33,480 Required: What is the monthly break-even point in units sold and in sales dollars? Without resorting to computations, calculate the total contribution margin at the break-even point. How many units would have to be sold each quarter to earn...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 316,000 $ 20 Variable expenses 221,200 14 Contribution margin 94,800 $ 6 Fixed expenses 78,000 Net operating income $ 16,800 Required: 1. What is the monthly break-even point in unit sales and in dollar sales?            Break Even Point in unit sales            Break Even Point in dollar sales 2. Without resorting to computations, what is the total contribution margin at...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 302,000 $ 20 Variable expenses 211,400 14 Contribution margin 90,600 $ 6 Fixed expenses 73,200 Net operating income $ 17,400 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total    Per Unit   Sales $ 600,000 $ 40        Variable expenses 420,000 28        Contribution margin 180,000 $ 12        Fixed expenses 148,800   Net operating income $   31,200 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 310,000 $ 20 Variable expenses 217,000 14 Contribution margin 93,000 $ 6 Fixed expenses 73,200 Net operating income $ 19,800 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 604,000 $ 40 Variable expenses 422,800 28 Contribution margin 181,200 $ 12 Fixed expenses 154,800 Net operating income $ 26,400 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 300,000 $ 20 Variable expenses 210,000 14 Contribution margin 90,000 $ 6 Fixed expenses 77,400 Net operating income $ 12,600 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $320,000 $ 20 Variable expenses 224,000 14 Contribution margin 96,000 $ 6 Fixed expenses 75,000 Net operating income $ 21,000 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 320,000 $ 20 Variable expenses 224,000 14 Contribution margin 96,000 $ 6 Fixed expenses 75,000 Net operating income $ 21,000 Required: 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...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total    Per Unit   Sales $ 318,000 $ 20        Variable expenses 222,600 14        Contribution margin 95,400 $ 6        Fixed expenses 76,800   Net operating income $   18,600 Required: 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...