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What is the companys cm ratio if monthly sales increase by

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Reference no: EM13568722

Exercise 5-11 Break-Even Analysis; Target Profit; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7]

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

Total    Per Unit
  Sales $ 620,000
$ 40     
  Variable expenses
434,000

28     

  Contribution margin
186,000
$ 12     
  Fixed expenses
145,200



  Net operating income $   40,800





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


  Break-even point in unit sales units
  Break-even point in sales dollars $           
2. Without resorting to computations, what is the total contribution margin at the break-even point?
  Total contribution margin $   
3. How many units would have to be sold each month to earn a target profit of $73,200? Use the formula method.
  Units sold   
4.

Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.(Round your percentage answer to 2 decimal places.)

      Dollars   Percentage   
  Margin of safety $    %
5.

What is the company's CM ratio? If monthly sales increase by $65,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?


  CM ratio %
  Net operating income increases by $       

Reference no: EM13568722

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