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: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ 624,000 436,800 187,200 154,800 $ 32,400 Per Unit $ 40 28 $ 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 $67,200? 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 $86,000 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. Reg 1 Req 2 Req 3A Req 3B Reg 5 Reg 4 Complete this question by entering your answers in the tabs below. Reg 1 Reg 24 Req Req 3B Reg 4 Req 5 Without resorting to computations, what is the total contribution margin at the break-even point? Total contribution margin more units thereby increasing sale change in fixed expenses, by how much would you expect monthly net operating income to Complete this question by entering your answers in the tabs below. Req 1 Req 2 Peq Req 3B Req 4 Reg 5 How many units would have to be sold each month to attain a target profit of $67,200?. 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 0 $ $ 0 $ 0 and P Is the company's CM ratio? If the company can sell more units thereby increasing change in fixed expenses, by how much would you expect monthly net operating income 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 $86,000 per month and the 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. Reg 1 Req2 Reg 3A Reg 38 Reg 4 Req What is the company's CM ratio? If the company can sell more units thereby increasing sales by $86,000 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 Req4
