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Connect C Loose Leat For Managerial Ac X Stice LA Child Development C How to Apply for a” Find a Doctor add mom anywhere El Yahoo! 吐Apple D Disney E ESPN-Imported From Safari Saved Help Save & Exit Submi mework Check my work Menlo Company distributes a single product. The company’s sales and expenses for last month follow Total 636,000 445,200 90,800 r Unit s 40 Sales 28 s 12 iable expenses Contribution margin Pixed expenses set operating incone s 40,800 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 month to attain a target profit of \$75,600? 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. tis the company’s CM ratio? If sales increase by \$58,000 per month and there is no change in fixed expenses, by how much 5 Wha would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below.

Solution

1.

Unit sales to break even=fixed expenses/unit contribution margin

=\$150,000/\$12

=12,500 units

Break even sales in dollar=12,500×\$40

=\$500,000

2. Total contribution margin at break even point=\$150,000

Because at break even point contribution margin is equal to fixed costs as there is no profit or loss at this point.

3.a.

Units sold to attain target profit=(target profit+fixed expenses)/contribution margin per unit

=(75600+150,000)/\$12

=18,800 unit

3.b. contribution margin income statement:

Sales(18800×\$40)=\$752,000

Less variable costs(18800×\$28)=\$526,400

Contribution margin=\$225,600

Less fixed costs=\$150,000

Net operating income=\$75,600

4. Margin of safety in dollars=Total sales-breakeven sales

=\$636,000-\$500,000

=\$136,000

Margin of safety in % term=margin of safety in dollars/total sales

=\$136,000/636,000

=21.38%

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