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Menlo Company distributes a single product. The companys sales and expenses for last month follow: Total Per Unit Sales $ 636,000 $ 40 Variable expenses
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 $57,600? 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 $88,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? |
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