Menlo Company distributes a single product. The company’s sales and expenses for last month follow:Total Per UnitSales .................................................... $450,000 $30Variable expenses ............................... 180,000 12Contribution margin ............................. 270,000 $18Fixed expenses ................................... 216,000Net operating income .......................... $ 54,000Required:1. What is the monthly break-even point in units sold and in sales dollars?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 earn a target profit of $90,000? Use the formulamethod. Verify your answer by preparing a contribution format income statement at the target saleslevel.4. Refer to the original data. Compute the company’s margin of safety in both dollar and percentageterms.5. What is the company’s CM ratio? If sales increase by $50,000 per month and there is no change infixed expenses, by how much would you expect monthly net operating income to increase?
Menlo Company distributes a single product. The company’s sales and expenses for last month follow:
Total Per Unit
Sales .................................................... $450,000 $30
Variable expenses ............................... 180,000 12
Contribution margin ............................. 270,000 $18
Fixed expenses ................................... 216,000
Net operating income .......................... $ 54,000
Required:
1. What is the monthly break-even point in units sold and in sales dollars?
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 earn a target profit of $90,000? Use the formula
method. 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 percentage
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 expect monthly net operating income to increase?
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