Question

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 the break-even point?

Total contribution margin

3-a. How many units would have to be sold each month to attain a target profit of $29,400?

Units sales needed to attain target profit

3-b. Verify your answer by preparing a contribution format income statement at the target sales level.

Contribution Income statement

4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

Margin of safety Dollars and Percentage

5. What is the company’s CM ratio? If sales increase by $80,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

CM ratio

Net Operating income increase by

Answer #1

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
$
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...

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...

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...

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...

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,...

Due to erratic sales of its sole product—a high-capacity battery
for laptop computers—PEM, Inc., has been experiencing financial
difficulty for some time. The company’s contribution format income
statement for the most recent month is given below:
Sales (13,400 units
× $20 per unit)
$
268,000
Variable expenses
134,000
Contribution margin
134,000
Fixed expenses
149,000
Net operating loss
$
(15,000
)
Required:
1. Compute the company’s CM ratio and its break-even point in
unit sales and dollar sales.
2. The...

Due to erratic sales of its sole product—a high-capacity battery
for laptop computers—PEM, Inc., has been experiencing financial
difficulty for some time. The company’s contribution format income
statement for the most recent month is given below:
Sales (13,200 units × $20 per unit) $ 264,000 Variable expenses
158,400 Contribution margin 105,600 Fixed expenses 117,600 Net
operating loss $ (12,000 ) Required: 1. Compute the company’s CM
ratio and its break-even point in unit sales and dollar sales. 2.
The...

Due to erratic sales of its sole product—a high-capacity battery
for laptop computers—PEM, Inc., has been experiencing financial
difficulty for some time. The company’s contribution format income
statement for the most recent month is given below:
Sales (13,400 units × $30 per unit)
$
402,000
Variable expenses
241,200
Contribution margin
160,800
Fixed expenses
178,800
Net operating loss
$
(18,000
)
Required:
1. Compute the company’s CM ratio and its break-even point in
unit sales and dollar sales.
2. The...

Olongapo Sports Corporation distributes two premium golf
balls—Flight Dynamic and Sure Shot. Monthly sales and the
contribution margin ratios for the two products follow:
Product
Flight Dynamic
Sure Shot
Total
Sales
$
660,000
$
340,000
$
1,000,000
CM ratio
61
%
77
%
?
Fixed expenses total $594,500 per month.
Required:
1. Prepare a contribution format income statement for the
company as a whole.
2. What is the company's break-even point in dollar sales based
on the current sales mix?...

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