Wesley Company manufactures and sells a single product. The companys 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

150,000

Net operating income

$

30,000

1.	What is the quarterly break-even point in units sold and in sales dollars?

Break-even point in units sold
Break-even point in sales dollars

2.

Without resorting to computations, calculate the total contribution margin at the break-even point.

Total contribution margin = ?

3.

How many units would have to be sold each quarter to earn a target profit of $18,000? Use the formula method.

Units sold to attain target profit = ?

4.

Refer to the original data. Compute the companys margin of safety in both dollar and percentage terms. (Round "Percentage" answer to 1 decimal place, (i.e., 0.123 should be considered as 12.3%).)

	Dollars	Percentage
Margin of safety			%

5.

What is the companys 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? (Do not prepare an income statement; use the CM ratio to compute your answer.)

CM ratio		%
Increased net income