Menlo Company distributes a single product. The company\'s sales and expenses fo
ID: 2397376 • Letter: M
Question
Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total 318,000 222,600 95,400 Per Unit ? 20 Sales Variable expenses Contribution margin Fixed expenses Net operating income 14 76,200 19,200 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 many units would have to be sold each month to attain a target profit of $33,000? 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 $97,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 3A Req 4 Req 5 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 salesExplanation / Answer
Total sales 318000 Contrirbution margin 95400 CM ratio (95400/318000)*100 30% Contribution margin per unit 6 Break even in units: Total fixed cost / CM per unit 76200 /6 = 12700 units Break even in $: Total fixed cost / CM ratio 76200 / 30% = $ 254000 Req b: Contribution margin at break even = $ 76200 (i.e. equal to fixed cost) Req c: Desired profit: 33000 Desired contribution" 76200+33000 = 109200 Target sales units: Desired contribution/ Cm per unit 109200 / 6 = 18200 units Req d: Margin of safety in $ : Net income/ CM ratio 19200 / 30% = 64000 Margin of safety in% of sales: 64000 /318000 *100 = 20.13 % Rreq e: CM ratio: Contribution/ Sales *100 95400 /318000 *100 =30% Additional sales: $ 97000 Additional contribution: 97000*30% = 29100 Additional Fixed cost: Nil Net income increase: 29100 -0 = 29100