Exercise 5-18 (Algo) Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio (LO5-1, LO5-3, LO5-5, LO5-6, LO5-7) Menlo Company distributes a single product. The company's sales and expenses for last month follow: Per Unit $ 40 28 Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 624,000 436,800 187,200 151,200 $ 36,000 $ 12 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 $68,400? 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 company's CM ratio? If the company can sell more units thereby increasing sales by $52,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req Req 3B Req 4 Req 5 What is the monthly break-even point in unit sales and in dollar sales? units Break-even point in unit sales Break-even point in dollar sales Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req Req 3B Req 4 Req 5 Without resorting to computations, what is the total contribution margin at the break-even point? Total contribution margin Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req Req 3B Req 4 Req 5 How many units would have to be sold each month to attain a target profit of $68,400? Units sales needed to attain target profit Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Req 4 Req 5 Verify your answer by preparing a contribution format income statement at the target sales level. Menlo Company Contribution Income Statement Total Per Unit Complete this question by entering your answers in the tabs below. Reqi Reg 2 Req Req 3B Req 4 Req 5 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 (i.e. 0.1234 should be entered as 12.34).) Dollars Percentage Margin of safety Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req Req 3B Reg 4 Req 5 What is the company's CM ratio? If the company can sell more units thereby increasing sales by $52,000 per month 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
