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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