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Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales Variable expenses Contribution margin Fixed expenses
Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales Variable expenses Contribution margin Fixed expenses Net operating income $450,000 180,000 270,000 216,000 $ 54,000 $30 12 $18 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. How many units would have to be sold each month to earn a target profit of $90,000? Use the formula method. 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 company's CM ratio? 6. Based on the original data, if the company increases advertising by $30,000, sales are predicted to increase by 10%. Calculate the new net operating income and comment on whether this change would be advisable 7. Refer to the original data. What is the degree of operating leverage? 8. Based on #7, if sales increased by 12%, what would be the increase in net operating income
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