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Menlo Company distributes a single product
| Menlo Company distributes a single product. The company’s sales and expenses for last month follow: |
| Total | Per Unit | ||||
| Sales | $ | 624,000 | $ | 40 | |
| Variable expenses | 436,800 | 28 | |||
| Contribution margin | 187,200 | $ | 12 | ||
| Fixed expenses | 147,600 | ||||
| Net operating income | $ | 39,600 | |||
| Required: | |
| 1. | What is the monthly break-even point in unit sales and in dollar sales? |
| 2. | Without resorting to computations, what is the total contribution margin at the break-even point? |
| 3-a. | How many units would have to be sold each month to earn a target profit of $63,600? Use the formula method. |
| 3-b. | Verify your answer by preparing a contribution format income statement at the target sales level. |
| 4. |
Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34). |
| 5. |
What is the company’s CM ratio? If monthly sales increase by $97,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? |
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