Question
Wesley Company manufactures and sells a single product. The company's income statement at sales level of 12,000 units for last quarter follows: Sales Less: Variable
Wesley Company manufactures and sells a single product. The company's income statement at sales level of 12,000 units for last quarter follows: Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net operating income Total $600,000 420,000 180,000 150,000 $ 30,000 Required: 1. What is the monthly break-even point in units sold and in sales dollars? (Round your intermediate calculations and final answers to the nearest whole number.) Break-even point in units sold Break-even point in sales dollars Break-even Point 2. Without resorting to computations, calculate the total contribution margin at the break-even point for the quarter. Total contribution margin 3-a. How many units would have to be sold each quarter to earn a target profit of $54,000? Use the formula method. Units sold to attain target profit 3-b. Verify your answer by preparing a contribution format income statement at the target level of sales. Sales Total Unit 204,000 0 $ 204,000 4. Refer to the original data. Compute the company's margin of safety for the quarter in units, in dollars and as a percentage of last quarter's sales. (Round "Percentage" answer to 1 decimal place, (i.e., 0.123 should be considered as 12.3%).) Units Dollars Margin of safety Percentage % 5. What is the company's CM ratio? If quarterly sales decrease by $18,000 and there is no change in fixed expenses, what would you expect the quarter's net operating income to be? (Do not prepare an income statement; use the CM ratio to compute your answer.) CM ratio Net operating income %
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