Menlo Compan y distributes a single product. The company\'s sales and expenses f
ID: 2544859 • Letter: M
Question
Menlo Compan y distributes a single product. The company's sales and expenses for last month follow: Per Unit $ 20 14 Total Sales Variable expenses 215,600 Contribution margin Fixed expenses 92,400 75,000 $ 6 Net operating income S 17,400 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 sales dollars units 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 earn a target profit of $33,600? Use the formula method nits soldExplanation / Answer
1) Break even point units = 75000/6 = 12500 units
Break even point sales = 12500*20 = 250000
2) Contribution margin on break even point = 12500*6 = 75000
3a) Required unit sales = (75000+33600)/6 = 18100 units
3b) Contribution margin income statement :
4) Margin of safety units = 15400-12500 = 2900 units
Margin of safety sales = 2900*20 = 58000
Margin of safety percentage = 58000*100/308000 = 18.83%
5) CM ratio = 6*100/20 = 30%
Net operating income will increase by (70000*30%) = 21000
Per unit Total Sales 20 362000 Variable cost 14 253400 Contribution margin 6 108600 Fixed cost 75000 Operating income 33600