Exercise 5-11 Break-Even Analysis; Target Profit; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7]

Pringle Company distributes a single product. The companys sales and expenses for a recent month follow:

	Total			Per Unit
Sales	$	616,000		$	40
Variable expenses		431,200			28
Contribution margin		184,800		$	12
Fixed expenses		151,200
Net operating income	$	33,600

Required:
1.	What is the monthly break-even point in units sold and in sales dollars?

Break-even point in unit sales	units
Break-even point in sales dollars	$

2.	Without resorting to computations, what is the total contribution margin at the break-even point?

Total contribution margin

$

3.	How many units would have to be sold each month to earn a target profit of $75,600? Use the formula method.

Units sold

4.	Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. (Round your percentage answer to 2 decimal places.)

	Dollars	Percentage
Margin of safety	$	%

5.	What is the companys CM ratio? If monthly sales increase by $77,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

CM ratio	%
Net operating income increases by	$