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

	Total			Per Unit
Sales	$	318,000		$	20
Variable expenses		222,600			14
Contribution margin		95,400		$	6
Fixed expenses		73,800
Net operating income	$	21,600

Required:

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

a) Break-even point in unit sales=

b) Break-even point in sales dollar=

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

Total contribution margin=

3-a. How many units would have to be sold each month to earn a target profit of $30,600? Use the formula method.

Units sold=

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

4. Refer to part 3 and now assume that the tax rate is 40%. How many units would need to be sold each month to an after-tax target profit of $30,600? (Round the final answer to the nearest whole number.)

Unit sales required=

5. 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 ? ? %

6. What is the companys CM ratio? If monthly sales increase by $55,000 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 to increased by%=

Menlo Company Contribution Income Statement Total OS KOMIN 0