Menlo Company distributes a single product. The company’s salesand expenses for last month follow:
| Total | | Per Unit |
| Sales | $ | 302,000 | | $ | 20 | |
| Variable expenses | | 211,400 | | | 14 | |
| Contribution margin | | 90,600 | | $ | 6 | |
| Fixed expenses | | 75,600 | | | | |
| Net operating income | $ | 15,000 | | | | |
|
Required:
1. What is the monthly break-even point in unit sales and indollar sales?
2. Without resorting to computations, what is the totalcontribution margin at the break-even point?
3-a. How many units would have to be sold each month to attain atarget profit of $31,800?
3-b. Verify your answer by preparing a contribution formatincome statement at the target sales level.
4. Refer to the original data. Compute the company's margin ofsafety in both dollar and percentage terms.
5. What is the company’s CM ratio? If sales increase by $90,000per month and there is no change in fixed expenses, by how muchwould you expect monthly net operating income to increase?
