Question

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 month to attain a target profit of $63,600?

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 sales increase by $74,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Answer #1

1) Break even unit = 154800/12 = 12900 Units

Break even sales = 12900*40 = $516000

2) Total contribution margin at break even = 154800

3a) Required unit = (154800+636000/12 = 18200 Units

3b) Contribution margin income statement

Sales | 728000 |

variable cost | 509600 |

Contribution margin | 218400 |

Fixed cost | 154800 |

Operating income | 63600 |

4) Margin of safety = 604000-516000 = 88000

Margin of safety (%) = 88000/604000 = 14.57%

5) CM ratio = 12/40 = 30%

Net operating income increase = 74000*30% = 22200

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
$
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...

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What is the monthly break-even point in unit sales and in dollar
sales? 2. Without resorting to computations, what is the total
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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 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
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
$
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 ....................... (15,000 units)
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Variable expenses
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Contribution margin
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Fixed expenses
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