Question

MENTO COMPANY distributes a single product. The company's sales and expenses for last month follow: The company sales 15,000 units last month.

Sales ....................... (15,000 units) ....................$ $450,000

Variable expenses ............................................. 180,000

Contribution margin ............................................. $ 270,000

Fixed expenses ................................................... 216,000

Net operating income ........................................... . $ 54,000

**REQUIRED**

1. What is the monthly BREAK EVEN POINT in units and dollar sales?

2. What is the Contribution Margin at the Break Even Point ?

3. How many units have to be sold to earn a profit of $90,000 ?

4. Refer to original data, compute the MARGING OF SAFETY in dollars .

Answer #1

**Answer
1**

**BREAK EVEN POINT in units = 12,000 units**

**BREAK EVEN POINT in dollar sales = $
360,000**

*Calculations:*

BREAK-EVEN POINT in units = Fixed Cost / Contribution per unit

= $ 216000 / $ 18

= 12,000 units

BREAK EVEN POINT in dollar sales = 12,000 * 30

= $ 360,000

**Answer
2**

**Contribution Margin at the Break Even Point = $
216,000**

*Calculations:*

Contribution Margin at the Break Even Point =Sales units * Contributon per unit

= 12,000 * 18

= 216,000

**Answer
3**

**Units to be sold to earn a profit of $90,000 = 17,000
units**

*Calculations:*

Units to be sold to earn a profit of $90,000 = ( Fixed Cost + Profit ) / Contribution per unit

= ($ 216000 + 90,000) / $ 18

= 17,000 units

**Answer
4**

**MARGIN OF SAFETY = $ 90,000**

*Calculations:*

MARGIN OF SAFETY = Profit / Contribution ratio

= $ 54,000 / 0.6

= $ 90,000

**In case of any doubt, please comment.**

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
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
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
$
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
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...

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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...

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...

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,...

Last year, Twins Company reported $750,000 in sales (25,000
units) and a net operating income of $25,000. At the break-even
point, the company's total contribution margin equals $500,000.
Based on this information, the company's:
a.
contribution margin ratio is 40%.
b.
break-even point is 24,000 units.
c.
variable expense per unit is $9.
d.
variable expenses are 60% of sales.

Wildhorse Company bottles and distributes B-Lite, a diet soft
drink. The beverage is sold for 50 cents per 16-ounce bottle to
retailers, who charge customers 75 cents per bottle. For the year
2020, management estimates the following revenues and
costs.
Sales
$1,850,000
Selling expenses—variable
$95,000
Direct materials
470,000
Selling expenses—fixed
54,000
Direct labor
340,000
Administrative expenses—variable
30,000
Manufacturing overhead—variable
360,000
Administrative expenses—fixed
109,000
Manufacturing overhead—fixed
170,000
Calculate variable cost per bottle. (Round variable
cost per bottle to 3 decimal places,...

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