Pringle Company sells a single product. The companys sales and expenses for a

recent month follow:

TOTAL PER UNIT

Sales $600,000 $40

Less Variable Expenses 420,000 28

Contribution Margin 180,000 $12

Less fixed expenses 150,000

Net Operating Income $ 30,000

Required:

a) What is the monthly break-even point in units sold and in sales dollars?

b) Without resorting to computations, what is the total contribution margin at the

break even point?

c) How many units would have to be sold each month to earn a minimum target

profit of $18,000? Use the contribution margin method. Verify your answer

by preparing a contribution income statement at the target level of sales.

d) Refer to the original data. Compute the companys margin of safety in both

dollar and percentage terms.

e) What is the companys CM ratio? If monthly sales increase by $80,000 and

there is no change in fixed expenses, by how much would you expect monthly

net operating income to incease?