Lindon Company is the exclusive distributor for an automotive product. The product sells $40 per unit and has a CM ratio of 30%. The company's fixed expenses are $180,000 per year. Required: 1. What are the variable expenses per unit? 2. Using the equation method: a. What is the break-even point in units and sales dollars? b. What sales level in units and in sales dollars 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 units and in sales dollars?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Lindon Company is the exclusive distributor for an automotive product. The product sells $40 per unit and has a CM ratio of 30%. The company's fixed expenses are $180,000 per year.

Required:

1. What are the variable expenses per unit?

2. Using the equation method:

a. What is the break-even point in units and sales dollars? b. What sales level in units and in sales dollars 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

units and in sales dollars?

3. Repeat (2) above using the unit contribution method.

 

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