EXERCISE 5-18 Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio LOS-1, LOS-3, LOS-5, LOS-6, LOS-7 Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales. $450,000 $30 .... IE Variable expenses. 180,000 12 ... ... 270,000 216,000 $18 Contribution margin Fixed expenses Net operating income. $ 54,000 Re 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. How many units would have to be sold each month to attain a target profit of S90.000? 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 percent- age terms. 5. What is the company's CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expecL monthly net operating income to increase?
EXERCISE 5-18 Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio LOS-1, LOS-3, LOS-5, LOS-6, LOS-7 Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales. $450,000 $30 .... IE Variable expenses. 180,000 12 ... ... 270,000 216,000 $18 Contribution margin Fixed expenses Net operating income. $ 54,000 Re 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. How many units would have to be sold each month to attain a target profit of S90.000? 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 percent- age terms. 5. What is the company's CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expecL monthly net operating income to increase?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:EXERCISE 5-1S Break-Even and Target Profft Analysis; Margin of Safety; CM Ratio LOS-1, LOS-3,
LOS-5, LOS-6, LOS-7
Menlo Company distributes a single product. The company's sales and expenses for last month
follow:
Total
Per Unit
$450,000
180,000
$30
12
Sales
Varlable expenses.
270,000
$18
Contribution margin
Fixed expenses
216,000
Net operating Income.
$ 54,000
Required
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.
How
many units would have to be sold each month to attain a target profit of S90.000? Verify
your answer by preparing a contribution format income statement at the target sales level.
4.
Refer to the original data. Compule the company's margin of safety in both dollar and percent-
age terms.
5.
What is the company's CM ratio? If sales increase by $50,000per month and there is no change
in fixed expenses, by how much would you expct monthly net operating income to increase?
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