Calculate the total contribution margin at the break-even

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Reference no: EM132055850

Wesley Company manufactures and sells a single product. The company's sales and expenses for last quarter follow:

	Total		Per Unit
Sales	$	1,000,000	$	50
Less: Variable expenses		600,000		30

Contribution margin		400,000	$	20

Less: Fixed expenses		260,000

Net operating income	$	140,000

Required:

1. What is the quarterly break-even point in units sold and in sales dollars?

2. Without resorting to computations, calculate the total contribution margin at the break-even point.

3. How many units would have to be sold each quarter to earn a target profit of $80,000? Use the formula method.

4. Refer to the original data. Compute the company's margin of safety for the quarter in both dollar and percentage terms. (Round "Percentage" answer to 1 decimal place, (i.e., 0.123 should be considered as 12.3%).)

5. What is the company's CM ratio? If quarterly sales increase by $40,000 and there is no change in fixed expenses, by how much would you expect quarterly net operating income to increase? (Do not prepare an income statement; use the CM ratio to compute your answer.)

Reference no: EM132055850

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