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

	Total			Per Unit
Sales	$	302,000		$	20
Variable expenses		211,400			14
Contribution margin		90,600		$	6
Fixed expenses		76,800
Net operating income	$	13,800

Required:

3-a.

How many units would have to be sold each month to earn a target profit of $36,000? Use the formula method.

	Units sold

3-b.

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

Menlo Company
Contribution Income Statement
	Total	Per unit

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).

	Dollars	Percentage
Margin of safety			%

5.

What is the companys CM ratio? If monthly sales increase by $70,000 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