Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Menlo Company distributes a single product
Menlo Company distributes a single product. The company's sales and expenses for last month follow
sxkxx $ 600,000 420,000 § 40 28 Verdable expenses Contribution bargdn 180,000 153,600 5 12 Fixed expapa Pt opreting ilIC $ 6,400
Required: t 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 attain a target profit of $57,600? 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 &safety in both dollar and percentage terms. &What is the canTanY's mt.? 4.. increase by $54.000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
Expert Solution
1)
(a) Breakeven Point in Unit Sales = Fixed cost / Contribution margin per unit
= 153,600 / 12
= 12,800 Units
(b) Breakeven Point in Dollar Sales = 12,800 * $40 = $512,000
2) Total contribution margin at Breakeven Point shall be equal to Fixed Cost = $ 153,600
3-a) Required Sales = (Fixed COst + Target Profit)/Contribution Margin per Unit
= ($153,600+$57,600)/$12
= 17,600 units
3-b)
| Menlo Company | |
| Contribution Income Statement | |
| Particulars | Amount ($) |
| Sales (17,600 units*$40) | 704000 |
| Less: Variable Expenses (17,600*$28) | 492800 |
| Contribution Margin | 211200 |
| Less: Fixed Expenses | 153600 |
| Net Operating Income | 57600 |
4)
Margin of safety in Dollars = Actual Sales - Breakeven Sales
= 600000 - 512000
= $88,000
Margin of safety in % = 88000 / 600000 * 100 = 14.67%
5)
CM ratio remains same, unless there is change in selling price per unit or variable cost per unit
CM Ratio = 12 / 40 * 100 = 30 %
Net operating income increase by = 54,000 * 30% = $16,200
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
