SPI-K manufactures and sells a single product. The company's sales and expenses for last quarter follow: Total
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Question:
SPI-K manufactures and sells a single product. The company's sales and expenses for last quarter follow:
Total
Per Unit
Sales
$600,000
$40
Less: Variable Expenses
$420,000
$28
Contribution Margin
$180,000
$12
Less: Fixed Expenses
$146,520
Net Operating Income
$33,480
Required:
- What is the monthly break-even point in units sold and in sales dollars?
- Without resorting to computations, calculate the total contribution margin at the break-even point.
- How many units would have to be sold each quarter to earn a target profit of $18,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target level of sales.
- Refer to the original data. Compute the company's margin of safety for the quarter in both dollar and percentage terms.
- What is the company's CM ratio? If quarterly sales increase by $80,000 and there is no change in fixed expenses, by how much would you expect quarterly net operating income to increase?
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