Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 450,000 180,000 270,000 216,000 $ 54,000 Per Unit $30 12 $18 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 attain a target profit of $90,000? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level.
Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 450,000 180,000 270,000 216,000 $ 54,000 Per Unit $30 12 $18 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 attain a target profit of $90,000? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Menlo Company distributes a single product. The company's sales and expenses for last month follow:
Per
Unit
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
Total
$ 450,000
180,000
270,000
216,000
$ 54,000
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 attain a target profit of $90,000?
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 dollar and percentage terms.
5. What is the company's CM ratio? If the company can sell more units, thereby increasing sales by $50,000 per month, and there is no
change in fixed expenses, by how much would you expect monthly net operating income to increase?
Req 1
Complete this question by entering your answers in the tabs below.
Req 2
$ 30
12
$18
Req 3A
Req 3B
What is the monthly break-even point in unit sales and in dollar sales?
Break-even point in unit sales
Break-even point in dollar sales
units
Req 4
< Req 1
Req 5
Req 2 >
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