EXERCISE 6-10 Break-Even Analysis; Target Profi t; Margin of Safety; CM Ratio [ LO1 , LO3 , LO5 , LO6 , LO7 ] Pringle Company distributes a single product. The company's sales and expenses for a recent month follow: Total Per Unit Sales . . . . . . . . . . . . . . . . . . . . . . $600,000 $40 Variable expenses . . . . . . . . . . . . 420,000 28 Contribution margin . . . . . . . . . . . 180,000 $12 Fixed expenses . . . . . . . . . . . . . . 150,000 Net operating income . . . . . . . . . . $ 30,000 Required: 1. What is the monthly break-even point in units sold and in sales dollars? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3. How many units would have to be sold each month to earn a target profi t of $18,000? Use the contribution margin method. Verify your answer by preparing a contribution format income statement at the target level of sales. 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 monthly sales increase by $80,000 and there is no change in fi xed expenses, by how much would you expect monthly net operating income to increase?