Lindon Company is the exclusive distributor for an automotive
product that sells for $35.00 per unit...
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Accounting
Lindon Company is the exclusive distributor for an automotiveproduct that sells for $35.00 per unit and has a CM ratio of 31%.The company’s fixed expenses are $249,550 per year. The companyplans to sell 24,000 units this year.
Required:
1.
What are the variable expenses per unit? (Round youranswer to 2 decimal places.)
2.
Use the equation method:
a.
What is the break-even point in unit sales and in dollar sales?(Do not round intermediate calculations.)
b.
What amount of unit sales and dollar sales is required to earnan annual profit of $54,250? (Do not round intermediatecalculations.)
c.
Assume that by using a more efficient shipper, the company isable to reduce its variable expenses by $3.60 per unit. What is thecompany’s new break-even point in unit sales and in dollar sales?(Do not round intermediate calculations. Round up breakeven point answers to the nearest whole number.)
3.
Repeat (2) above using the formulamethod.
a.
What is the break-even point in unit sales and in dollar sales?(Do not round intermediate calculations.)
b.
What amount of unit sales and dollar sales is required to earnan annual profit of $54,250? (Do not round intermediatecalculations.)
c.
Assume that by using a more efficient shipper, the company isable to reduce its variable expenses by $3.60 per unit. What is thecompany’s new break-even point in unit sales and in dollar sales?(Do not round intermediate calculations. Round up breakeven point answers to the nearest whole number.)
Answer & Explanation
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3.6 Ratings (396 Votes)
1 Selling price per unit 35 per unit Contribution margin ratio 31 Fixed expenses 249550 Since contribution margin ratio is 31 hence variable expenses must be 69 of selling price Variable expenses 35 x 69 2415 per unit 2a At Break even point there is no profit
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