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

	Total			Per Unit
Sales	$	632,000		$	40
Variable expenses		442,400			28
Contribution margin		189,600		$	12
Fixed expenses		147,600
Net operating income	$	42,000

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 $64,800?

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 sales increase by $87,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

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

2. Total contribution margin $__________

3A. Units sales needed to attain target profit __________

3B. Menlo Company

Contribution Income Statement

Sales

Variable expenses

Contribution margin

Fixed expenses

Net operating income

4.

	Dollars	Percentage
Margin of safety			%

5.

CM ratio			%
Net operating income increases by

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