Check my WoR Lindon Company is the exclusive distributor for an automotive produ
ID: 2337307 • Letter: C
Question
Check my WoR Lindon Company is the exclusive distributor for an automotive product that sells for $22.00 per unit and has a CM ratio of 30%. The company's fixed expenses are $105,600 per year. The company plans to sell 17,400 units this year. Required: 1. What are the varlable 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 $39,600 per year? 4. Assume that by using a more efficient shipper,the company is able to reduce its variable expenses by $2.20 per unit. What is the company's new break-even point in unit sales and in dollar sales?Explanation / Answer
Question 1 Working
A
Sale Price per unit
$ 22.00
B
CM Ratio
30%
C=A x B
Unit Contribution
$ 6.60
D=A-C
Unit Variable cost [Answer 1]
$ 15.40
Question 2 Working
A
Fixed Cost
$ 105,600.00
B
Unit Contribution
$ 6.60
C=A/B
Break Even point in Unit Sales [Answer 2(a)]
$ 16,000.00
D
CM Ratio
30%
E=A/D
Break even point in dollar sales [Answer 2(b)]
$ 352,000.00
Question 3 Working
A
Fixed Cost
$ 105,600.00
B
Expected annual profits
$ 39,600.00
C=A+B
Total contribution required
$ 145,200.00
D
Unit contribution
$ 6.60
E=C/D
No. of units to earn target profit
$ 22,000.00
F=E x $22 per unit
Amount of Sale dollars
$ 484,000.00
Question 4 Working
A
Sale Price per unit
$ 22.00
B = $15.40-2.2
New variable cost per unit
$ 13.20
C =A-B
New contribution margin
$ 8.80
D=C/A
New CM ratio
40%
E
Fixed Cost
$ 105,600.00
F=E/C
Break Even point in Unit Sales
12000.00
G=E/D
Break even point in dollar sales
$ 264,000.00
Answers
Question 1 Working
A
Sale Price per unit
$ 22.00
B
CM Ratio
30%
C=A x B
Unit Contribution
$ 6.60
D=A-C
Unit Variable cost [Answer 1]
$ 15.40
Question 2 Working
A
Fixed Cost
$ 105,600.00
B
Unit Contribution
$ 6.60
C=A/B
Break Even point in Unit Sales [Answer 2(a)]
$ 16,000.00
D
CM Ratio
30%
E=A/D
Break even point in dollar sales [Answer 2(b)]
$ 352,000.00
Question 3 Working
A
Fixed Cost
$ 105,600.00
B
Expected annual profits
$ 39,600.00
C=A+B
Total contribution required
$ 145,200.00
D
Unit contribution
$ 6.60
E=C/D
No. of units to earn target profit
$ 22,000.00
F=E x $22 per unit
Amount of Sale dollars
$ 484,000.00
Question 4 Working
A
Sale Price per unit
$ 22.00
B = $15.40-2.2
New variable cost per unit
$ 13.20
C =A-B
New contribution margin
$ 8.80
D=C/A
New CM ratio
40%
E
Fixed Cost
$ 105,600.00
F=E/C
Break Even point in Unit Sales
12000.00
G=E/D
Break even point in dollar sales
$ 264,000.00