Menlo Company manufactures and sells a single product. The company’s revenue and expenses for the last quarter follow: Total Per unit Revenune 450000 30 Less variable expenses 180000 12 Contribution margin 270000 18 Less fixed expenses 216000 Profit 54000 1 What is the quarterly break-even point in units sold and in revenue? 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 quarter to earn a target profit of £90,000? Use the unit contribution method. Verify your answer by preparing a contribution statement of profit or loss at the target level of revenue.
Menlo Company manufactures and sells a single product. The company’s revenue and expenses for the last quarter follow:
| Total | Per unit | |
| Revenune | 450000 | 30 |
| Less variable expenses | 180000 | 12 |
| Contribution margin | 270000 | 18 |
| Less fixed expenses | 216000 | |
| Profit | 54000 |
1 What is the quarterly break-even point in units sold and in revenue?
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 quarter to earn a target profit of £90,000? Use the unit contribution method. Verify your answer by preparing a contribution statement of profit or loss at the target level of revenue.
4 Refer to the original data. Compute the company’s margin of safety in both pound and percentage terms.
5 What is the company’s CM ratio? If revenue increase by £50,000 per quarter and there is no change in fixed expenses, by how much would you expect quarterly profit to increase? (Do not prepare a statement of profit or loss; use the CM ratio to compute your answer.)
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