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 $31.00 per unit and has a CM ratio of 35%. The companys fixed expenses are $217,000 per year. The company plans to sell 21,000 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? (Do not round intermediate calculations.)

b.	What amount of unit sales and dollar sales is required to earn an annual profit of $54,250? (Do not round intermediate calculations.)

c.	Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.30 per unit. What is the companys new break-even point in unit sales and in dollar sales? (Do not round intermediate calculations. Round up break even point answers to the nearest whole number.)

3.	Repeat (2) above using the formula method.

a.	What is the break-even point in unit sales and in dollar sales? (Do not round intermediate calculations.)

b.	What amount of unit sales and dollar sales is required to earn an annual profit of $54,250? (Do not round intermediate calculations.)

c.	Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.30 per unit. What is the companys new break-even point in unit sales and in dollar sales? (Do not round intermediate calculations. Round up break even point answers to the nearest whole number.)