What is the monthly break-even point in unit sales

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Reference no: EM131914398

Problem

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

	Total	Per Unit
Sales	308,000	20
Variable expenses	215,600	14
Contribution margin	92,400	6
Fixed expenses	76,800
Net operating income	15,600

Required:

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

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

3-a. How many units would have to be sold each month to earn a target profit of $27,000? Use the formula method.

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

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 (i.e .1234 should be entered as 12.34).

5. What is the company's CM ratio? If monthly sales increase by $63,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Reference no: EM131914398

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