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?

Name: EXERCISE 5-1S Break-Even and Target Profft Analysis; Margin of Safety
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Description: EXERCISE 5-1S Break-Even and Target Profft Analysis; Margin of Safety; CM Ratio LOS-1, LOS-3,LOS-5, LOS-6, LOS-7Menlo Company distributes a single product. The company's sales and expenses for last monthfollow:TotalPer Unit$450,000180,000$3012SalesV

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 2 The following monthly data in contribution format are available for the Ross Company and its only product. Product SD: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ $ $ $ $ 381,600 304.800 76,800 34,500 42,300 Per Unit $ 5 159 127 32 The company produced and sold 2,400 units during the month and had no beginning or ending inventories. a) What is the current operating leverage? b) Projections indicate that the market will worsen by 15% next month. What is the projected net operating income given this increase?
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