Menlo Company distributes a single product. The companys sales and expenses for last month follow: Total Per Unit Sales $ 636,000 $ 40 Variable expenses 445,200 28 Contribution margin 190,800 $ 12 Fixed expenses 156,000 Net operating income $ 34,800

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 earn a target profit of $60,000? Use the formula method.

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. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

5. What is the companys CM ratio? If monthly sales increase by $76,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?