Question

Lindon Company is the exclusive distributor for an automotive product that sells for $32.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $177,600 per year. The company plans to sell 20,900 units this year.

**Required:**

1. What are the variable expenses per unit?

2. What is the break-even point in unit sales and in dollar sales?

3. What amount of unit sales and dollar sales is required to attain a target profit of $81,600 per year?

4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.20 per unit. What is the company’s new break-even point in unit sales and in dollar sales?

Answer #1

1 | |||||||||

Variable expenses per unit = 32*(1-0.3)= $22.4 | |||||||||

2 | |||||||||

Break-even point in unit sales = Fixed expenses/Unit contribution margin = 177600/(32-22.4)= 18500 | |||||||||

Break-even point in dollar sales = 18500*32= $592000 | |||||||||

3 | |||||||||

Unit sales = (177600+81600)/(32-22.4)= 27000 | |||||||||

Dollar sales = 27000*32= $864000 | |||||||||

4 | |||||||||

Revised variable cost = 22.4-3.2= $19.2 | |||||||||

Break-even point in unit sales = Fixed expenses/Unit contribution margin = 177600/(32-19.2)= 13875 | |||||||||

Break-even point in dollar sales = 13875*32= $444000 | |||||||||

Lindon Company is the exclusive distributor for an automotive
product that sells for $32.00 per unit and has a CM ratio of 30%.
The company’s fixed expenses are $177,600 per year. The company
plans to sell 20,900 units this year.
Required:
1. What are the variable expenses per unit? (Round your
"per unit" answer to 2 decimal places.)
2. What is the break-even point in unit sales and in dollar
sales?
3. What amount of unit sales and dollar sales...

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product that sells for $36.00 per unit and has a CM ratio of 30%.
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Required:
1. What are the variable expenses per unit? (Round your
"per unit" answer to 2 decimal places.)
2. What is the break-even point in unit sales and in dollar
sales?
3. What amount of unit sales and dollar sales...

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1. What are the variable expenses per unit? (Round your
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2. What is the break-even point in unit sales and in dollar
sales?
3. What amount of unit sales and dollar sales...

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Lindon Company is the exclusive distributor for an automotive
product that sells for $36.00 per unit and has a CM ratio of 30%.
The company’s fixed expenses are $210,600 per year. The company
plans to sell 22,300 units this year.
Required:
1. What are the variable expenses per unit? (Round your
"per unit" answer to 2 decimal places.)
2. What is the break-even point in unit sales and in dollar
sales?
3. What amount of unit sales and dollar sales...

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product that sells for $30.00 per unit and has a CM ratio of 30%.
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Required:
1. What are the variable expenses per unit? (Round your
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2. What is the break-even point in unit sales and in dollar
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3. What amount of unit sales and dollar sales...

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"per unit" answer to 2 decimal places.)
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