Break-Even and Target Profit Analysis [LO5–3, LO5–4, LO5–5, LO5–6] Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company’s fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year. Required: 1. What are the variable expenses per unit? 2. Using the equation method: a. What is the break-even point in unit sales and in dollar sales? b . What amount of unit sales and dollar sales is required to earn an annual profit of $60,000? c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit. What is the company’s new break-even point in unit sales and in dollar sales? 3. Repeat (2) above using the formula method.
Break-Even and Target Profit Analysis [LO5–3, LO5–4, LO5–5, LO5–6] Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company’s fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year.
Required: 1. What are the variable expenses per unit? 2. Using the equation method: a. What is the break-even point in unit sales and in dollar sales? b . What amount of unit sales and dollar sales is required to earn an annual profit of $60,000? c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit. What is the company’s new break-even point in unit sales and in dollar sales? 3. Repeat (2) above using the formula method.
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