Reference no: EM132979098
Question - Wesley Company manufactures and sells a single product. The company's sales and expenses for last quarter follow:
total per unit
Sales $600,000 $40
Less: variable expenses 420,000 28
Contribution margin 180,000 $12
Less: Fixed expenses 146,520
Net operating income $33,480
Required -
1. What is the monthly 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 profile of $18,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target level of sales.
4. Refer to the original data. Compute the company's margin of safety for the quarter in both dollar and percentage terms.
5. What is the company's CM ratio? If quarterly sales increase by $80,000 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.)
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