Raven Company sells a single specialized product. The companys sales andexpenses for a recent month are given below:

TOTAL

Sales $300,000

PER UNIT

$60 45 $15

Less Variable Expenses Contribution Margin Less fixed expenses Net Operating Income

Required:

180,000 120,000 70,000 $ 50,000

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 $25,000? Use the contribution margin method. Verify your answer by preparing a contribution income statement at the target level of sales.

d) What is the companys CM ratio? If monthly sales increase by $50,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?