E3–2 Time allowed: 20 minutes Lindon Company is the exclusive distributor for an automotive product. The product sells for £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 pounds?

(b) What sales level in units and in sales pounds 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 sales pounds?
3 Repeat Question 2 above using the unit contribution method.