Menlo Company distributes a single product. The companys sales and expenses for last month follow:

	Total	Per Unit
Sales	$ 314,000	$ 20
Variable expenses	219,800	14
Contribution margin	94,200	$ 6
Fixed expenses	78,000
Net operating income	$ 16,200

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 $24,600?

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 companys 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?

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

Break-even point in unit sales		units
Break-even point in dollar sales

Without resorting to computations, what is the total contribution margin at the break-even point?

	Total contribution margin

How many units would have to be sold each month to attain a target profit of $24,600?

	Units sales needed to attain target profit

Verify your answer by preparing a contribution format income statement at the target sales level.

Menlo Company
Contribution Income Statement
	Total	Per Unit

efer 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			%

What is the companys 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