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 $28.00 per unit and has a CM ratio of 30%. The companys fixed expenses are $147,000 per year. The company plans to sell 19,500 units this year.

Required:

1. What are the variable expenses per unit?

2. What is the break-even point in unit sales and in dollar sales?

3. What amount of unit sales and dollar sales is required to attain a target profit of $63,000 per year?

4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $2.80 per unit. What is the companys new break-even point in unit sales and in dollar sales?