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ERCISE 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio 6, LO7] enlo Company distributes a single product. The company's sales and expens low: Total Per Unit Sales..... $450,000 $30 .... Variable expenses 180,000 12 .... 270.000

ERCISE 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio 6, LO7] enlo Company distributes a single product. The company's sales and expens low: Total Per Unit Sales..... $450,000 $30 .... Variable expenses 180,000 12 .... 270.000

Financial & Managerial Accounting
Financial & Managerial Accounting
14th Edition
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter20: Variable Costing For Management Analysis
Section: Chapter Questions
Problem 20.4APR: Salespersons' report and analysis Walthman Industries Inc. employs seven salespersons to sell and...
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EXERCISE 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio [LO1, LO3, LO5, L06, LO7] Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales... Variable expenses $450,000 $30 180,000 12 Contribution margin Fixed expenses. 270,000 216,000 $18 Net operating income $ 54,000 Required: 1. What is the monthly break-even point in units sold and in sales dollars? Without resorting to computations, what is the total contribution margin at the break-even point? 3. How many units would have to be sold each month to earn a target profit of $90,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level. 2. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percent- age terms. 5. What is the company's CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
Transcribed Image Text:EXERCISE 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio [LO1, LO3, LO5, L06, LO7] Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales... Variable expenses $450,000 $30 180,000 12 Contribution margin Fixed expenses. 270,000 216,000 $18 Net operating income $ 54,000 Required: 1. What is the monthly break-even point in units sold and in sales dollars? Without resorting to computations, what is the total contribution margin at the break-even point? 3. How many units would have to be sold each month to earn a target profit of $90,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level. 2. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percent- age terms. 5. What is the company's CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
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