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Homework answers / question archive / Menlo Company distributes a single product

Menlo Company distributes a single product

Accounting

Menlo Company distributes a single product. The company’s sales and expenses for last month follow:
  Total Per Unit
Sales $ 450,000   $ 30
Variable expenses   180,000     12
 

 

 

 

 

 
Contribution margin   270,000   $ 18
Fixed expenses   216,000  

 

 
 

 

 

 

    
Net operating income $ 54,000      
 

 

 

 

    

 
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 $90,000? 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.
   
5.

What is the company’s CM ratio? If monthly sales increase by $50,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
 

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