Question

**Break-Even Point and Target Profit Measured in Sales
Dollars (Single Product).** Nellie Company has monthly fixed
costs totaling $100,000 and variable costs of $20 per unit. Each
unit of product is sold for $25 (these data are the same as the
previous exercise):

*Required:*

Calculate the contribution margin ratio.

Find the break-even point in sales dollars.

What amount of sales dollars is required to earn a monthly profit of $60,000?

Answer #1

Contribution margin ratio = **20%**

**Explanation;**

Contribution margin ratio = Contribution margin per unit / Sale per unit

Contribution margin per unit ($25 – $20) = $5

Sale price = $25

Hence, contribution margin ratio ($5 / $25) = 20%

Break-even point in sales dollars = **$500000**

**Explanation;**

Break-even point in sales dollars = Fixed costs * Sale price / Contribution margin per unit

Break-even point in sales dollars = $100000 * $25 / $5

= $500000

Sales dollars is required to earn a monthly profit of $60,000 =
**$800000**

**Explanation;**

Sale amount = (Fixed costs + Desired profit / Contribution margin per unit) * Sale price

Sale amount = ($100000 + $60000 / $5) * $25

Sale amount = ($160000 / $5) * $25

= $800000

Break-Even Point and Target
Profit Measured in Units (Multiple Products). Hi-Tech
Incorporated produces two different products with the following
monthly data.
Cell
GPS
Total
Selling price per unit
$100
$400
Variable cost per unit
$ 40
$240
Expected unit sales
21,000
9,000
30,000
Sales mix
70 percent
30 percent
100 percent
Fixed costs
$1,800,000
Assume the sales mix remains the same
at all levels of sales.
Required:
Calculate the weighted average contribution margin per unit.
How many units in total must...

Exercise 5-18 Break-Even and Target Profit Analysis; Margin of
Safety; CM Ratio [LO5-1, LO5-3, LO5-5, LO5-6, LO5-7]
Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
312,000
$
20
Variable expenses
218,400
14
Contribution margin
93,600
$
6
Fixed expenses
73,200
Net operating income
$
20,400
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the...

Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses.
It serves hospitals and clinics throughout the metropolitan area.
Health-Temp Company believes it will place temporary nurses for a
total of 24,500 hours next year. Health-Temp charges the hospitals
and clinics $110 per hour and has variable costs of $86.90 per hour
(this includes the payment to the nurse). Total fixed costs equal
$545,391.
Required:
1. Calculate the contribution margin per unit
and the contribution...

Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses.
It serves hospitals and clinics throughout the metropolitan area.
Health-Temp Company believes it will place temporary nurses for a
total of 21,000 hours next year. Health-Temp charges the hospitals
and clinics $120 per hour and has variable costs of $96.00 per hour
(this includes the payment to the nurse). Total fixed costs equal
$484,800.
Required:
1. Calculate the contribution margin per unit
and the contribution...

Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses.
It serves hospitals and clinics throughout the metropolitan area.
Health-Temp Company believes it will place temporary nurses for a
total of 23,500 hours next year. Health-Temp charges the hospitals
and clinics $120 per hour and has variable costs of $96.00 per hour
(this includes the payment to the nurse). Total fixed costs equal
$548,640.
Required:
1. Calculate the contribution margin per unit
and the contribution...

Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses.
It serves hospitals and clinics throughout the metropolitan area.
Health-Temp Company believes it will place temporary nurses for a
total of 29,000 hours next year. Health-Temp charges the hospitals
and clinics $110 per hour and has variable costs of $95.70 per hour
(this includes the payment to the nurse). Total fixed costs equal
$404,690.
Required: 1. Calculate the contribution margin per unit and the
contribution...

CHAPTER 6 HOMEWORK
Exercise 6-18 Break-Even and Target Profit Analysis; Margin of
Safety; CM Ratio [LO6-1, LO6-3, LO6-5, LO6-6, LO6-7]
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
72,600
Net operating income
$
22,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations,...

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
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...

Halifax Products sells a product for $108. Variable costs per
unit are $55, and monthly fixed costs are $111,300.
a. What is the break-even point in
units?
b. How many units would need to be sold to earn a
target profit of $206,700?
c. Assuming they achieve the level of sales
required in part b, what is the margin of safety in sales
dollars?

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