Exercise 5-14 Break-Even and Target Profit Analysis [LO5-3, LO5-4, LO5-5, LO5-6]

Lindon Company is the exclusive distributor for an automotive product that sells for $31.50 per unit and has a CM ratio of 30%. The companys fixed expenses are $187,110 per year. The company plans to sell 9,600 units this year.

Required: 1. What are the variable expenses per unit? (Round your answer to 2 decimal places.)

2. Use the equation method: a. What is the break-even point in unit sales and in dollar sales?

b. What amount of unit sales and dollar sales is required to earn an annual profit of $47,250?

c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.15 per unit. What is the companys new break-even point in unit sales and in dollar sales?

3. Repeat (2) above using the formula method. a. What is the break-even point in unit sales and in dollar sales?

b. What amount of unit sales and dollar sales is required to earn an annual profit of $47,250?

c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.15 per unit. What is the companys new break-even point in unit sales and in dollar sales?

rev: 09_25_2015_QC_CS-26203, 11_03_2015_QC_CS-26203, 12_22_2015_QC_CS-26203 ReferenceseBook & Resources