Company ABC distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $90,000 $30 Variable expenses $36,000 $12 Contribution margin $54,000 $18 Fixed expenses $16,000 Net operating income $38,000 What is the monthly break-even point in unit sales and in dollar sales? (2 marks) Without resorting to computations, what is the total contribution margin at the break-even point? (2 marks) How many units would have to be sold each month to earn a target profit of $11,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level.
Company ABC distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $90,000 $30 Variable expenses $36,000 $12 Contribution margin $54,000 $18 Fixed expenses $16,000 Net operating income $38,000 What is the monthly break-even point in unit sales and in dollar sales? (2 marks) Without resorting to computations, what is the total contribution margin at the break-even point? (2 marks) How many units would have to be sold each month to earn a target profit of $11,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 4PB: West Island distributes a single product. The companys sales and expenses for the month of June are...
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Company ABC distributes a single product. The company’s sales and expenses for last month follow:
|
Total |
Per Unit |
Sales |
$90,000 |
$30 |
Variable expenses |
$36,000 |
$12 |
Contribution margin |
$54,000 |
$18 |
Fixed expenses |
$16,000 |
|
Net operating income |
$38,000 |
|
-
- What is the monthly break-even point in unit sales and in dollar sales? (2 marks)
- Without resorting to computations, what is the total contribution margin at the break-even point? (2 marks)
- How many units would have to be sold each month to earn a target profit of $11,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level. (2 marks)
- Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms. (2 marks)
- What is the company’s CM ratio? If sales increase by $10,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? (2 marks)
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