Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Exercise 2-18 (Algo) Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio [LO2-1, LO2-3, LO2-5, LO2-6, LO2-7] Menlo Company distributes a single product. The
Exercise 2-18 (Algo) Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio [LO2-1, LO2-3, LO2-5, LO2-6, LO2-7] Menlo Company distributes a single product. The companys sales and expenses for last month follow: Total Per Unit Sales $ 306,000 $ 20 Variable expenses 214,200 14 Contribution margin 91,800 $ 6 Fixed expenses 73,800 Net operating income $ 18,000 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 $28,200? 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 both dollar and percentage terms. 5. What is the companys CM ratio? If the company can sell more units thereby increasing sales by $56,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started