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Wesley Company manufactures and sells a single product. The company's sales and expenses for last quarter follow: Sales Less: Variable expenses Total $1,000,000 600,000 Per
Wesley Company manufactures and sells a single product. The company's sales and expenses for last quarter follow: Sales Less: Variable expenses Total $1,000,000 600,000 Per Unit $ 50 30 Contribution margin 400,000 $ 20 Less: Fixed expenses 260.000 Net operating income $ 140,000 Required: 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 1,300 65,000 $ 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 $80,000? Use the formula a. method. Units sold to attain target profit 3- Verify your answer by preparing a contribution format income statement at the target level of sales. Total Unit Sales 340,000 4. Refer to the original data. Compute the company's margin of safety for the quarter 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 company's CM ratio? If quarterly sales increase by $40,000 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 operating income
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