Compute the company margin of safety in dollarterms

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Reference no: EM132792822

Menlo Company distributes a single product. The company's sales and expenses for last month follow:

                                             Total Per            Unit

Sales                              $620,000        $40

Variable expenses              434,000       28

Contribution margin             186,000     $12

Fixed expenses                 153,600

Net operating income       $32,400

Problem 1. What is the monthly break-even point in unit sales and in dollar sales?

Problem 2. Without resorting to computations, what is the total contribution margin at the break-even point?

Problem 3-a. How many units would have to be sold each month to attain a target profit of $51,600?

Problem 3-b. Verify your answer by preparing a contribution format income statement at the target sales level.

Problem 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

Problem 5. What is the company's CM ratio? If sales increase by $73,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Reference no: EM132792822

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